Regulatory changes and shifting client expectations can make it difficult for advisers to maximise their potential and position their business for sustainable growth – so here's a proposal: split financial planning from advice.
First let's consider this: when a firm solely provides financial planning it is not required to be registered with or regulated by the Financial Conduct Authority.
Pure financial planning means there is no preparation for financial advice, there is no referral to a specific financial advice firm, and there is no compensation received from a financial advice firm.
But when you split financial planning from financial advice, you can meet new clients that do not require product distribution.
You meet the occupational pension scheme members, the residential and commercial property landlords, the business owners, the clients of discretionary managers, the self-directed investors, and those underserved by the financial adviser community because of their limited wealth.
Think of a financial plan as a strategy to reach a financial goal. Here, financial products are a secondary consideration. The main focus is asset strategies and cash flow planning, the creation of assets, placement of ownership, and the distribution of emerging cash flows.
Should the emerging cash need to be saved in financial assets, the client can always do this themselves or speak to a financial adviser.
Benefitting client, planner and society
I believe there are a myriad of benefits for consumers in using a firm that solely provides financial planning. Consider these:
- Empowerment. Clients take an active role in managing their finances, with support and guidance from planners, who provide tools, training, and ongoing assistance.
- Ownership. Clients fully own their financial plan, data, and assets, tailoring the plan to their unique needs, goals, and values.
- Agency and control. Clients can make informed decisions and take control of their financial journey, leading to increased engagement and better outcomes.
- Transparency. The model promotes transparency, trust, and unbiased advice, empowering clients to understand the reasoning behind strategies.
- Access. The generic nature of the advice means it can be dispensed to groups or on demand, planners exchange know-how instead of time, the model becomes scalable, and the price point for consumers drops significantly, providing access for all.
- Wealth creation. Focusing on pure financial planning means productive assets (intangibles) are identified, entrepreneurial opportunities leveraged, and sustainable livelihoods created to eliminate poverty.
But there are benefits for planners too. The approach allows them to act as facilitators and professional allies, supporting their clients in creating their own financial plans while providing expertise and guidance.
They can positively impact clients' lives by equipping them with knowledge, tools, and skills for financial success.
They can also leverage digital tools and platforms, allowing for an efficient and scalable delivery of services.
The nature of their work becomes more human and less administrative, and I believe, ultimately more enjoyable and less stressful because they have fewer liabilities due to not specifically recommending a product.
But I believe there are also tangible benefits to society as a whole.
Take financial inclusion: dis-intermediated financial planning extends access to financial services to previously underserved or excluded individuals.
The model helps individuals build wealth, create sustainable livelihoods and reduce poverty by actively involving them in financial planning, and it promotes a culture of transparency, trust and client-centricity, fostering stronger relationships between planners and clients.
So think about the possibility of a pure financial planning firm emerging in this landscape, as it evolves at an unprecedented pace amid regulatory shifts, changing client expectations and technological transformation.
One that places clients at the forefront of its practice, forges stronger relationships, cultivates trust, and delivers empowering solutions placing data and asset ownership more with its clients.
Focusing on pure financial planning would allow advisers to build a sustainable business model that aligns with their values and enables long-term success.
