(Guest post by Michael Basi, principal of Basi & Basi Financial Planning Ltd)
Success of any business is, first and foremost, determined by profit. At the risk of sounding like a stuck record, without profit, no business can survive for the long-term. All plans for the best client care in the world are null and void if a practice is not actually around to provide such!
A business in any industry, when analysing the market and judging the likelihood of generating a profit from it – must start with the consumer. What does a consumer of financial planning services want to see? It is worth noting that our industry is somewhat more complicated, given we have a “mandatory consumer” in our regulator, with a very specific list of demands and needs in addition to the actual clients we service. So let’s take their fundamental requirements at a high level;
The FSA:
- Business in line with regulatory principles
- Evidence to demonstrate this
Clients:
- High quality financial planning advice which they can understand which is….
- …predicated on full market research and includes….
- ….monitoring of the on-going suitability of these recommendations
It stands to reason that meeting consumer requirements to a required extent, at lower cost, will result in greater profit. Therefore, having the tools in place to service these requirements in an efficient manner is the centre of a profitable practice. So where to start?
Use Adviser Workstation
First, define how you are going to perform your market research. What are the criteria? Ratings? Statistical measures? Whatever your choices, turn them into a formula for each asset class and geographic split.
With our practice, we then turned these equations into search criteria in the “Workspace” area of Workstation. Within this area of Workstation, select “New search” and choose the Universe (likely Open-End funds). One “search” could then be the following criteria as an example:
– IMA Sector = UK All Companies (only funds in this sector)
– Morningstar Rating >= 4 (only funds with a Morningstar rating of 4 or above)
As you add each criteria, hit the “Run Search” button in the bottom right to watch the universe become a filtered pool. When you are happy the number of filters has narrowed down the selection accordingly, BEFORE you hit “OK”, click “Save” at the top. This will store this criteria for easy repeat at quarterly reviews. Then click “OK”.
The list that results is your point-in-time output from your criteria.
Keep an Audit Trail
Before you do anything else, from the “Action” menu, select “Save As” and select “Investment List”. I usually provide a descriptive name with the date included. This will keep your FSA consumer happy!
Now, I tend to create new model portfolios from my selected funds from each Investment List, and also date these to keep a trail of my investment decisions which I also document.
I then move to the Research section “Alerts” section and add a new alert
Communicate with the Client
So the FSA consumer should now be happy with the evidence we have. However, how does the “true” consumer, the client, know your worth? They need to see evidence of your work which they can understand. The reporting functionality within Adviser workstation is a key enabler to allow you to justify your fees.
Multiple reports are available from within Adviser Workstation, however we have settled on the following, which we find easy to talk a client through and something we can refer back to time and again;
– Asset Allocation comparison (current to ideal)
– Snapshot report
– Efficient Frontier chart
– Overal Customised Financial Planning Report
The final element, within the planning module, is most powerful. Within this, you can select almost any other available reports and combine to form a useful appendix for your covering Product confirmation letter.
But how will your client see this information? Two methods, via the web and via their smartphone.
Adding client reports to the (soon to be upgraded further) client portal allows a level of accessibility which many clients are not used to. This saves considerable time when combined with meaningful reports providing context, allowing the client to be quickly reminded of their investment plan in the light of (frequently negative) media reports.
Utilising a service such as provided by Onvestor (www.onvestor.co.uk) allows these reports and much other customised content from your firm to be available for clients to digest on the move, whilst commuting, indeed anytime. The incorporation of useful daily tools within this application is also a good idea, encouraging the client to keep your practice firmly in their sights each day.
Summary
Utilising building blocks of what our consumers actually want, together with technology available to deliver this in a cost-effective manner which self-promotes the firm can put us on the path to a bright future – both during 2012 and, more importantly, in the competitive world after this.
Michael Basi is principal of Basi & Basi Financial Planning Ltd, a independent practice, and a shareholder within Onvestor Limited, a new venture providing mobile services to financial planning firms.
If you would like to contribute to this blog, please email your submission to: adviser@morningstar.co.uk with subject line “Blog post”
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How much detail do you need to know about the investment products you recommend? Do the prospectus of a fund and an updated provider fact sheet provide sufficient insight or do you need to dissect it further? As products become more and more specialized a more in-depth analysis of the fund and how it’s invested can help ensure it’s the right fit for the client or the portfolio in question.