With over twenty years’ experience in financial services I have been fortunate to work in product development and distribution to the intermediary market, product distribution to the direct client and financial planning.
I will argue that there is a place for both direct clients and financial planning but there are concerns that I have about the DIY market.
Firstly I want to touch on the financial planning market, this has changed massively over the last ten years and as you will see from my last blog financial planning is less about the investment but more about the plan and taking someone along that journey. You could argue that perhaps financial advice in the past might have been a little bit like the Wild West but like the Wild West it has now become respectable, of course there will be some blips but every industry has that.
Over a two year period I developed a direct to consumer wrap platform, I haven’t spoken about this in detail before but the premise was that the company I worked for was a successful online marketing platform. They had had considerable success in selling structured products and cash products to individuals and they believed that they could repeat this success through a direct platform providing other investment products.
Their marketing strategy opened my eyes to how it all works; it is all about selling products and headlines. The individual is sucked into the headlines “a 6% p.a. return” looks good and an individual is drawn to that.
I won’t be drawn as to the rights or wrongs of this because I was part of this but it is an important point to consider.
I recently met someone who stated that changes in the financial industry post RDR offer massive opportunities in the direct space, in fact the way he was talking almost implied that the people left without advice where fair game and effectively rich pickings. Perhaps this is unfair but I challenged him on this and explained that I felt that actually where the opportunity is, is not around the products and investments but around education and then providing the tools to deliver goals.
But clearly this individual did not believe this, he just saw the opportunities to pick up orphaned clients and sell them products. I have seen papers encouraging people to abandon their IFAs and go direct, I have heard IFAs say how they will open a direct platform and to me all of this reminds me of the old days of the Wild West. There are potentially a handful of successful gold mines built over a number of years, and now there are lots of prospectors trying to take that gold with little knowledge of how to do it (although they believe they have the knowledge).
I believe in some cases these successful gold mines will need to change but these new prospectors are too busy following what has happened in the past without considering that the future is different. I also feel that actually for many of those prospectors opening up new sites and looking for “opportunities” their focus is on the gold without considering the client.
I predict like the intermediary world of old, the industry will over the next ten years go through a massive reshuffle with many losers but there will be winners and they will be those who don’t focus their models on the past but consider how the future might look. At the moment I haven’t seen any that take this approach.
And why do I think this, just consider how financial planning has changed to putting the client at the centre of its proposition…..
So beware of the gold seekers…….