Eschew products, support client-led advice: whitepaper

Simon Hoyle

By

March 20, 2017

A whitepaper has stated that the future of advice firms is an existence as genuine professional services firms, but added that licensees also need to adapt in order to support them.

The paper was jointly authored by Neil Younger, managing director and group chief executive of Fortnum Financial Group, and Joel Taylor, managing director of Fortnum Financial Advisers. It states that advice needs to be rebuilt on three pillars: a set of strong professional principles, sound professional judgement, and robust professional practices.

Taylor says Fortnum’s professional principles underpin what it calls its professional advice framework, which is designed to help advisers view their services “through a ‘professional’ lens as opposed to a legislative lens”. The principles cover fair engagement, competence, professional diagnosis, and best interest advice.

Younger says advice models are “transitioning from essentially licensee businesses that ran distribution business models, to advice services businesses that have a very different framework of solutions for advisers”.

“There is a vacancy in the middle-market segment for an established, professional advice services business with sufficient scale to be able to develop technology solutions that deliver efficiency into the delivery of advice,” he says.

Younger says the middle-market is the “non-institutionally owned space, and it’s not the boutique space”.

“It’s a licensee business with sufficient scale to be able not only to sustain itself but also to invest in future advice-related capabilities,” he continues. “I see it as not dissimilar to the accounting fraternity, where you’ve got PwC, EY, etc. They are professional services firms, and we don’t have that construct in the advice segment.”

Younger says that, until now, the traditional economic model of licensees has stood in the way of the development of “a business of significant scale that can essentially operate as a stand-alone advisory business”.

Plan to make money from advice

“It’s a distribution business versus an advice business,” he says. “You have to work out how you’re going to make money from advice, and that means you’ve got to do some things differently. Potentially, you’ve got to participate in leadership around advice models, you’ve got to have salaried capabilities, and you’ve got to have the ability, again through that investment in technology, to create a profit from advice that translates into value to the advisers that are participating with you.”

Younger says that, in theory, a distribution-focused business can still deliver professional services, “But what is their focus? Today, I’m not sure they have the valuable headspace to be able to do that. And their pricing models don’t necessarily give them the kind of available capital to invest in those technologies.

“So their focus has traditionally been on lower-cost solutions for lower-value investors, and not so much investing in technology to support the traditional heartland financial advisory client.”

Younger says a professional advice services firm should focus on delivering two things: advice services that embody consumers’ likely future needs, and technology solutions that create efficiencies for practices delivering those advice solutions.

“It should be able to identify what consumers are going to need around advice solutions in the future, and enable the advice businesses that work within the network to be ready to deliver those, which is, again, where technology plays a big part,” he says.

“The game has moved on from what I would term commoditised dealer services. We all have to do compliance; it’s a necessary part of our business. We will all always manage risk within our business models. We all need to make sure our advisers are competent to deliver services, but the level required around these things to support the clients’ future advice needs is [even higher]. And we have to be ready to do that.”


TOPICS:   advice,  client-centric,  Fortnum Financial Advisers,  Fortnum Financial Group,  Joel Taylor,  Neil Younger