cial advisors will leave the profession by the end of the year. A representative of the authority told me that the average advisor in the U.K.
is in his 50s and has been working in the industry for nearly 30 years
(sound familiar?); many advisors will choose not to reinvent their practices to focus on advice rather than products.
It’s important to note that the U.K. is not the only country developing such regulations for financial services practitioners. Australia, for
example, rolled out a ban this year on “conflicted remuneration,” saying that advisors providing financial product advice to clients can only
receive remuneration from their clients. (We’d call that fee only.) The
Netherlands, Hong Kong and India are all following suit.
HYPOTHE TICAL CHANGES
Here’s an exercise: Imagine how your current practice would
need to change in the face of new regulations similar to the U.K.’s:
demanding fee and service transparency, banning commissions on
investment products and raising the level of professionalism of
Because of the new fee arrangement, you
would probably need to prune your client
base for unprofitable relationships.
You’d need to consider several aspects of your business.
Charging for advice: If you are not already charging for advice, you
would need to. That means separating your advice from execution
and being able to demonstrate your value to clients clearly. It also
means having a dedicated pricing structure that takes into account
the costs to deliver your services, while factoring in your expected
You’d then need to strategize on how you get your clients, how
they find value in what you do and whether they will happily pay for
your services. You would want to segment your current client base,
specifically identifying your relationships by complexity of advice and
profitability. You would likely need to develop a new service mix, creating levels of services and activities that you will perform for different
segments of your clients.
Because of the new fee arrangement, you will probably need to
prune your current client base for unprofitable relationships. You’ll
look toward wealthier clients or develop a system for managing multiple small accounts in order to keep up your income levels.
Further, you’ll need to get smarter about using technology and
integrating many of your back-office activities as profitability takes
center stage. Standardized processes could help you streamline both
service and support.
you have access to all investment solutions that
would fit your client base. That means you will
probably want to develop an optimum client
description and focus your marketing efforts on
You would also need a platform that would
allow you access to all the products you’d need.
For certification, you would need to prove to
an organizational body that you truly give independent advice.
Don’t have a college degree? That could be
a problem. Also, 35 hours of continuing education is a high bar: Even if you are already a certified financial planner, that’s more than double
your current requirement.
REALIT Y CHECK
Now think about this: The United States has
been a leader in the development of financial
planning and investment advisory services, but
it isn’t any longer. Given the global nature of the
financial services industry, I don’t believe we
can sustain our current advisory services system into the future.
I believe that change is coming and we’d be
wise to take an active role in helping to design
our changes, rather than having them developed by people who don’t know our business
models or our clients.
Look back now at the picture I’ve painted
for the future. Most of these changes would
actually be good business practices for
today, independent of the way you get paid.
These strategic decisions will help you create value for your clients, demonstrate your
professionalism and improve your bottom
I believe that professionalism is paramount;
we’re no longer sales-driven but solution-driven. We’re advisors, counselors and planners
who develop sound financial futures for our clients. Aren’t we? FP
Deena Katz, CFP, is a Financial Planning columnist and an associate professor of personal
financial planning at Texas Tech University.
She is also chairwoman of Evensky & Katz, an
advisory firm in Coral Gables, Fla.