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Wealth Management 2005 from
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The survival of the fittest
" By Mike Larbalestier
Director, Rossborough Financial Services
Financial advisers must recognise the necessity of adapting to changing conditions and client demand
Darwinian evolutionary theory states that the species that will ultimately survive is the one most adaptable to change. Although penned almost 150 years ago, Charles Darwin’s words are still broadly accepted today and arguably they are equally as applicable to the business world as they are to the world of flora and fauna.
As well as Jersey being in the process of significant economic and fiscal change clients’ expectations are also evolving. It is therefore an inevitable consequence that those involved in the business of providing independent financial advice in the Island must also adapt and change if they are to survive.
Unfortunately, it is also a fact of life that, as an industry, IFAs do not enjoy the greatest of reputations and to some, be it justified or not, the potential demise of certain advisers might not be considered a great loss! Others might consider them a necessary evil but all in all the IFA is not a particularly loved species.
Now we know that the baby should not be thrown out with the bath water and not all IFAs should be tarred with the same brush. However, the industry has come in for some considerable flack over recent years and does need to smarten up its act in certain areas.
Some advisers might not like it, and many may even deny it, but the world of financial advice really is changing and the expectations of our clients are evolving as investors become more financially aware and market-savvy.
Strangely, the dinosaurs in our industry appear to be oblivious to this and in fact are behaving more like ostriches. In fact they may well go the way of the dodo if they continue to adopt the one size fits all approach to financial advice and sell the same limited range of investments that they have done for years.
Some IFAs are trying to adapt but the switched-on advisers have recognised their limitations. They know that without strong in-house investment expertise they are going to struggle to survive as clients expect our industry to demonstrate greater investment knowledge and provide a wider choice.
Most financial advisers as individuals are generalists which means that they can turn their hand to life assurance, pensions, mortgages and investments, but they are rarely specialists. Today it is accepted practise, for example, to go to the back, knee, or hip specialist when considering major health issues. Increasingly, this is exactly what clients are beginning to demand from their financial advisers and they are less tolerant of the Jack of all trades adviser. More and more we are seeing clients who want, for example, an investment specialist who they know can bring in a pension specialist or a mortgage specialist at any time to give expert, in-depth, and not generalist, advice on another financial matter of great importance to that client.
The new breed of IFA is leaner than his old school competitor. He has realised that he needs to genuinely have his clients’ interests at heart if he is going to develop a long term sustainable and successful business. The modern day IFA can see beyond this month’s sales figures, preferring to take a jam tomorrow view. Investing for the future is something the new breed IFA knows about only too well and this is applicable to his own business as well as to his clients.
Much greater transparency is a courtesy that all clients must be afforded and the impact of charges and commissions on investment returns needs closer scrutiny. As an industry we must be able to demonstrate that we are genuinely able to enhance our clients’ financial well-being and that we do not exist simply to feather our own nests.
The modern approach should be to structure fees and commissions in such a way that the adviser is motivated to add value to the relationship over the longer term and not just sell a product without any ongoing service, hoping that the advice works out. Investments simply cannot be purchased and just left without close monitoring. The world changes constantly and today’s solution and fund manager may not be suitable for tomorrow’s economy. If an IFA does not have the wherewithal to see and manage this then lacklustre investment performance will come as sure as night follows day.
Darwin graphically spelled out the consequences of not adapting to a changing environment. Ultimately, the financial advisers that survive will be the ones that are the fittest and possess the will, and skill-sets, to adapt.
… and we all know what happened to the dinosaurs.
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