SWOTs go to the top of the class, says Peter Switzer.

With the nature of the financial plan­ning industry set to be changed by the forces of consolidation sweeping through the sector, and with the pending – while unknown at this time – regulatory changes, independent financial planners need to respond by exploiting their competitive advantage. So what is their competitive advantage? Try their very independence.

Planners cannot rely on this alone to build their businesses as they compete with other planners supported by the bigger players. How­ever, it is certainly a key asset they should learn to leverage off. There are some potential advantages in being “owned” by a bigger financial institution. A “big brother” could help generate leads and reduce costs through economies of scale, for example, although these are not always passed on to the financial planner in these groups. And there must be some perceived advantages in operating under these big umbrellas – more than just the right to operate under their licences. After all, there are smaller independent dealer groups who would offer similar services to the big boys at similar costs.

I suspect many planners like the bigger security blanket of a dealer group backed by a financial institution and some customers un­doubtedly like to think there is a big brand name behind the adviser. By the way, I suspect these big dealer groups will see some disgruntled financial planners leave and look for smaller, independent groups, given that some of them have had three or four different owners – sorry, I mean partners – in about five years. So what should independent financial planners be doing?

First, they have to make a commitment to understanding their customer like never before.The consumer attitude towards financial planners has become more negative since the Storm Financial debacle and it is in a planner’s interest to show that they are a horse of a different colour. Second, because all customers are different, you need to think about being flexible with your pricing policy. I know some firms that actually put forward three different pricing methods, from commissions to percentage fee for service and the true fee for service, or flat fee, method. The implication of all three methods is then explained to the customer, who is permitted to choose.

Third, you have to pin your colours to the mast and stand up for total transparency. The financial planning industry has been tolerant of too many practices that were not clearly explained to customers. Of course, they are not alone in working with their customers in the dark – even accountants and lawyers can come up with some surprising pricing decisions, which were not made apparent in initial meetings. Fourth, you create a marketing strategy that will rest on the three suggestions above; that is, your customer understanding, plus your pricing flexibility and your transparency. But on top of these you throw in your expertise and finally your independence.

This will be the making of a unique sell­ing proposition, which will define exactly who you are, what your business stands for and why someone would be mad to buy financial planning services from anyone else. Use these threats of a changing industry to turn them into opportunities. Get highly moti­vated to lift your business to a new level. I think it is the right time to do a SWOT – Strengths, Weaknesses, Opportunities and Threats – analysis not only on your business, but also on you as the business leader of your business. The American philosopher, Buckminster Fuller, once wisely observed: “If you want to teach people a new way of thinking, don’t bother trying to teach them. Instead, give them a tool, the use of which will lead to new ways of think­ing.” The “SWOT on yourself” is such a tool. However, if you are a procrastinator, maybe you need a business coach who will drag you kicking and screaming to a more competitive and profit­able business.

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