Ian Price, Divisional Director for pensions at St James’s Place, takes a spanner to some old assumptions about who should do what – and why?
Do we, as financial advisors, follow trends?
I am sure that some of you would have read that statement and thought: “okay, here comes another article about products or funds”. But it isn’t. I want to focus on trends. Do we notice them? Do we adapt and take them into consideration? And are we up to speed with new developments as much as other sectors are?
The older I get, the more interested I have become in trends. This might be the influence of my two twenty-something daughters and the different approach they take to everything – apart, that is, from their spending habits, where they follow the same pattern as their mother.) And I firmly believe that our industry does not pay enough attention to trends and current fashions and the influence these have on our clients.
I find it difficult to believe that I have been in the industry for 36 years. But over those years I have seen a lot of changes, and have watched as our industry catches up with other advances in the world. (I would also be a wealthy man if I had a pound for every time I have heard over the years that the industry is dead. But that’s another story.)
When I started in the industry, most clients reached the age of 60 or 65, took their tax-free cash and bought an annuity. There was no enhanced annuity in those days, and no drawdown and no fixed-term annuities either. Clients had a very clear idea of when they were going to retire. We had expressions like ‘normal retirement date’ or ‘selected retirement age’.
So when was the last time you used one of those terms? I’ll be returning to this in subsequent articles here in IFA Magazine.
Service with a Smile
For now, though, I want to look beyond financial services and focus on an industry that has changed and developed profoundly. I want to look at the car industry.
I can still remember my first company car. It was a white 1.3 SR Nova bought from Skurrays in Swindon (the store is now a branch of Aldi). I can remember the excitement of going to the showroom to collect the new vehicle. But the experience was completely different when I wanted it serviced. I had to go to a very miserable looking building behind the showroom, where a guy in a greasy overall came over, took my keys and said the car would be ready at around four o’clock.
Not good. But just look at what happens today. The service department is in the showroom of the garage. You’ll have very presentable people booking your car in for a service. There are waiting areas with Wi-Fi and free coffee, and a courtesy car is available if required. Your car is returned after a complete valet. This is now the norm at garage showrooms.
So why has the way cars are serviced changed? Because there’s more of an awareness of what exactly the customer wants. There is also a greater understanding of the financial value of the customer.
And there is recognition of the fact that most garages make more money from servicing than from selling cars…..
Now, our industry has an initial advice fee and an on-going advice fee. The motor industry already understands that the value of looking after a client comes from the on-going advice fee. And our industry also needs to grasp this development.
A very clear service strategy for our clients is crucial. Whenever I have my car serviced, I always get a call one week later to check that I am happy with the service and the car.
We all need to take time out to reflect on whether we have the right service strategy in place for our clients. We need to identify who should service the clients? After all, if we go back to the motor industry, we find that the people in the service department are different to the people that sell you the car. They have different skill sets.
The car industry has adapted the way it sells cars. Garages often have signs that say: “you can drive this car away for £199 per month!” And most cars are now sold through individual leasing schemes. Who would have thought that even 10 years ago? The automotive industry has made the car affordable for more people by quoting a monthly contribution.
Take a look at how our industry approaches retirement planning. We sometimes scare off clients when we say things like: “you will need, for example, a fund of £1,000,000 to be able to afford to retire.” That, for a lot of people, is simply intimidating. But if we started instead to break down the required amount into monthly amounts, would this help individuals to realise their retirement ambitions? I think it would.
It is important to look at how other industries have adapted. We are a very well-established professional industry that has undergone a lot of change over the years. And it is important that we continue to adapt to new trends. It is vital that we focus on what clients need and want in a changing environment if we are to continue to grow our business.