A look at the different parts of the value chain to understand: Who will be the winners and losers? What are the evolving risk and pricing models? What will the impact of sub-advisory, commoditisation and competition be? How you demonstrate value? Where are the gaps and what needs are not currently being met?
- Understanding what is important in the value chain.
- What points are most at risk?
- Vertical integration. Do you need to do it?
- Pricing models.
Key issues and challenges:
- Dealing with the potential conflicts of interest if you are fully vertically integrated.
- Understanding how being vertically integrated impacts their customer outcomes. The biggest risk taker in a vertically integrated model is the client.
- Platform fees - clients don’t really understand but they still pay a fee which you could argue benefits the adviser.
- Evolving as an industry. Financial advice cannot be regarded as a profession it is so sparsely spread. IFAs may do ok as individuals but collectively this isn’t sustainable.
- Industry is starved of new blood.
Conclusions and solutions:
- Vertical integration is not the “be-all & end all” for a firm. You can still offer a non-vertically integrated model effectively.
- Vertical integrators are trying to take control of the operations and commoditising advice.
- Platforms are the “weak link” in the chain and should be questioned.
- DFMs are also under pressure but at least they have a relationship, albeit less than the adviser.
- The acquisition of Intelliflo sent a shockwave across the industry.
- Communication with clients is key to justifying fees. Firms must have a strong belief in their proposition and have no issues explaining their value in relation to fees.
- Technology is a must to offer an integrated solution- to get people through the pipeline quickly. Participants discussed LEBC (not present in this session) who is using technology well to deal with thousands of retirement advice cases every month. Easy to scale as it’s a group of people with the same needs.
- Cashflow modelling has to keep developing.
Expert: Keith Hare - Benchmark Capital
Facilitators: Neil Baines-Thomas - Venture Development Solutions Ltd