Should you be offering a financial planning service in addition to your product advice/ intermediation service? Could that bring in eight times more clients?
Imagine eight people looking for financial planning.
Picture this. There are two financial planners. A conventional asset-based-fee financial planner (FP) and a fee-for-service non-intermediating financial planner (NIFP).
What if I told you that FP would turn all but one prospects away, as he could not figure out how he was going to get paid. But NIFP would see all eight and get paid.
Would you say that was an unlikely scenario?
The prospect that both would see had a windfall of over £100,000 of investable assets and wanted to know what best to do with it.
FP delivered a planning and intermediation service. NIFP delivered a planning and triage to several wealth management services, direct to consumer (D2C) platform, discretionary, advisory channels, and other ideas. Both FP and NIFP were paid £1,500 for planning, and FP earnt an additional implementation fee and ongoing fees.
Now let us consider the seven prospects FP would not see.
1. The prospect who was a fan of Andrew Hallam, author of Millionaire Expat: How to Build Wealth Living Overseas, who wanted to run his own money on a D2C platform using passive investments.
2. The residential property portfolio entrepreneur.
3. The business owner who said her business was her pension.
4. The member of a workplace pension scheme.
5. The client of the local stockbrokers who was in their discretionary service.
6. The prospect with less than £100,000 in investable assets.
7. The prospect in lockdown, or the other side of the country, who could only work digitally.
You see. As Robert Kiyosaki said,
“The rich don’t get rich by working, the rich get rich by creating an asset.”
FP thought there had to be an asset, and he had to run the asset to get paid. NIFP recognised that the asset was just an asset in the cash flow forecast, and if the client didn’t have one the plan was to create one.
Because NIFP didn’t require wet signatures she could service clients digitally, from anywhere.
Because NIFP didn’t make personalised product recommendations, she could deliver generic advice and financial education in groups. Her one-to-one coaching was £1,500. Her Masterclasses were £150 and she ran groups of 10. She recorded her Masterclasses, and placed recordings behind authentication and offered a client-centric cash flow app to subscribers for £15 per month, with 100 subscribers.
NIFP’s Masterclass was titled, “How to create a £100,000 asset with the business plan of you.”
Non-intermediating financial planning is the part of the financial planning process you do before product research, recommendation and implementation. Otherwise known as life planning, lifestyle financial planning, cash flow forecasting, planning the client, etc.. Where it is done in isolation from a regulated activity, it is a non-regulated activity.
If you want to become a non-intermediating financial planner contact us today to find out how the Academy of Life Planning can help you.
There are three key reasons why life planning is now the must learn skill for financial planners, discover more by joining me at Money Marketing Interactive 16 – 19 November 2020. Find out more and register at mmi.moneymarketing.co.uk.
The three key reasons are:
The commoditisation of investment returns.
The underserved need a life plan in these challenging times.
Non-intermediating financial planning can be delivered digitally to larger audiences.
What I mean by that is …
1. Because of the commoditisation of investment returns.
Would you agree, advisers are either people centred, or money centred. That is, as a regulated adviser in the UK, as an adviser-distributor, you are either leaning towards life planning, or towards product distribution. Do you know people like that, one or the other? I’m not saying you can’t be both. It’s just that problems may arise when you say you’re doing one thing, when in fact you are doing the other. Yes or no?
In the UK, 9 in 10 adviser incentives reward product distribution. Do you agree that incentives drive outcomes? That is asset-based fees drive more asset sales? So, your service could be leaning one way, whilst the way you get paid could be leaning the other.
Have you ever met a client that has their money tied up in a workplace pension, residential property, with a discretionary manager, or on a D2C platform, looking for financial advice, and you can’t figure how you are going to get paid? There’s no sniff of new assets, and you conclude perhaps that client isn’t right for you?
Don’t worry. I don’t anticipate any time soon there will be dramatic changes from the Financial Conduct Authority (FCA) for 2021 on fees. Though things have changed in other markets, such as Australia and India, I don’t see the UK’s FCA changing anything, any time soon. What was mentioned in June’s Policy Statement, disappeared from September’s “Call For Input: The Consumer Investment Market”. That is the topic of conflicted remuneration, and in particular the separation of advice and distribution or the prospect of yearly opt-ins.
According to The Transparency Taskforce, “It is obvious that market dynamics, incentives and vested interests have an impact on market behaviour, market conduct and decision-making. We believe this helps to explain why many value leaks (such as conflicted remuneration) are not being given the attention they deserve.”
“Sometimes, it is worse than “ignoring”, that is there is unjustifiable push back to maintain the status quo. This is not because of a flaw in the solution (in this case fee-for-service) but because the merits of the solution somehow represent an “inconvenient truth” for incumbent parties such as the existing asset managers, custodians, trustees, financial advisers, other services providers and so on.”
The key driver for change on fees for 2021 will be, in my opinion, the commoditisation of investment returns, following Vanguard’s pension launch in Dec 2019. Would you agree that investment returns are now commoditised? Yes or no?
UK intermediaries serve the 5% with investable assets over £100k (source: ONS), and it will be increasingly difficult to justify the cost of intermediation as a percentage of assets to a savvy investor in a commoditised market. Especially with the ascent of quality information on the internet and D2C platforms. Do you agree?
So, the life planning service, including cash flow forecasting, will be more important for your savvy wealthy investors who will be increasingly looking to pay on a fee-for-service basis, would you agree?
2. Because the underserved need a life plan in these challenging times.
Advisers can continue to serve the wealthy with life planning. That leaves 95% underserved on account of their limited wealth. Unfortunately, that also means if they lose their job, like many have now, it’s time to panic, because money can run out quickly when there are no more pay cheques to fund their lifestyle.
Would you agree with me that products manage wealth, and no products create wealth – people do with their creativity, entrepreneurial spirit, industry, and planning. As Robert Kiyosaki says, the rich don’t work to get rich, they create assets.
Would you agree that what the 95% need urgently are plans to create assets, like business plans, what we need to sell to the underserved right now are plans not products? Plans to improve wealth over the next few years in a post coronavirus economy. More so than plans to create wealth for a rainy day in the distant future. Isn’t that rainy day here, right now? Yes or no?
Research shows that one-in-two working adults are considering a career change as a result of the coronavirus pandemic, in the next 12 months. Most financial planners are looking at a time-line of five years plus, yes or no? What we do at the Academy is identify the client’s life purpose and preferred vocation, and where wealth is required we produce a three-year P&L of a side hustle to drop into the cash flow forecast. Is this something you could add to your financial planning tool kit?
This produces a growing income-producing asset to increase financial security short-term and begin to move the client to greater financial freedom in the long-term, where eventually they can stop working for a living and start living the life plan from the wealth they create.
You see, a non-intermediating financial planner (NIFP) sells plans not products.
3. Because non-intermediating financial planning can be delivered digitally to larger audiences.
When you remove product advice from financial planning what you are left with is life planning.
By removing personal recommendations NIFPs can advise groups. When we remove the need for wet signatures NIFPs can deliver digitally. When we remove selling, we remove the risk of mis-selling and that is why financial planning is a non-regulated activity that can be delivered at scale. But most importantly, when we remove products what we are left with are plans. Would you agree?
Would you agree that it is challenging for a regulated adviser to make more than 60 to 100 personal recommendations a year? When you exchange your time for money, your time is limited and so is your capacity and the money. Yes or no?
NIFPs exchange their knowhow for money. That is, generic advice and financial information. Knowhow can be delivered digitally online via eBooks and video courses. Your knowhow is unlimited, so is your audience. And, when your audience grows, the cost can drop, and you can serve many hundreds of underserved at lower cost. You can even serve while you sleep! Yes or no?
But financial planning should include cash flow modelling, do you agree? And, it would be challenging to do 100 Voyant reports all at the same time, or even while you sleep. Yes or no?
So, would you agree that what you need is a different process? A new, disruptive App perhaps, where many clients can enter data all at the same time in an online Masterclasses or while working through a workbook? A client-centred cash flow modeller, as you deliver your lessons on evidenced based investing, ESG filtering, behavioural investing, etc., your audience inputs data that they don’t even need to share. Data that they could share with other advisers, if they wished to. An app that is integrated with open banking applications and a host of other apps, that is portable from one adviser to the next. An app that avoids the value leak that is client churn! Would that be helpful, yes or no?
Well that’s exactly what we offer at AoLP. We have successfully democratised financial planning for the underserved, and our portable processes and revolutionary applications are available to plug the advice gap with a vastly different client-centred planning approach. We call it the GAME Plan.
If you would like to know more, please join us at Money Marketing Interactive or message us for more details.
If you want to become a non-intermediating financial planner contact us today to find out how the Academy of Life Planning can help you.
The Academy of Life Planning now offers a digital end-to-end non-intermediating financial planning ‘off the peg business in a box’ for a global network of advisers, as featured in the article in New Model Adviser in March 2020. And, endorsed by the Kinder Institute on Twitter. It’s called The GAME Plan Generator.
Perhaps you are a regulated financial adviser, facing the prospect of a second wave pandemic hitting new business income, with the regulator raising the bar on their fees and your capital adequacy whilst questioning the decency on recurring revenues.
Possibly your centralised investment proposition is being questioned during this economic crisis, and clients are increasingly benchmarking the higher returns from Vanguard direct after fees.
Potentially nine in ten prospects don’t have sufficient investable assets to be suitable as a client.
Imagine this. If as a consequence of us working together I or we could deliver to you …
Three months from now. You are looking back on a successful Masterclass, with an audience of 100 attendees each paying £495. Your digital proposition is fully scalable. Your webinar provides generic advice and financial education on, “Sensible Money: an evidence-based investment philosophy”. Through a self-directed journey of exploration, a Sparrow Capital fund on Fidelity can be viewed on Moneyhub, matched against an Oxford Risk budget, and modelled on Envizage to show the impact on future cash flows, and integrated into an AoLP financial plan, with the GAME Plan generator. By every attendee in a journey of self-exploration, all at the same time.
How would that feel?
Together we can do this …
This month’s launch from AoLP makes The GAME Plan Generator into a fully scalable digital end-to-end customer-centred financial planning experience.
The Financial Freedom Forecaster is the third of four parts of The GAME Plan Generator. The four parts are:
Goals: The Significant STORIES System: A multi-dimensional goals setting tool.
Actions: The Blockbuster ROADMAP: A project planning tool.
Means: The Financial Freedom Forecaster: A lifetime cashflow forecasting application.
Execution: The Stand & DELIVER Game Giver: A business planning tool and personal coaching.
This is the end-to-end digital delivery system of generic advice and financial education for planning firms who are members of the Academy of Life Planning adviser support network.
The AoLP lifetime cash flow planning tool is now available to purchase. For friends and supporters, a direct buy 100 months for £500 is available. For further details please visit our SHOP.
Digital is the new normal:
Coronavirus crisis 2020 accelerated digital delivery of financial advice
The pandemic has stress-tested digitalisation
Advisers have been forced to adopt digital channel delivery
Heightened financial and physical threats to the public increases demand
Growing acceptance and comfort with digital services
The wealthy expect the future wealth management relationships to be digital
Personal interaction still important for most
Growing support for fee-only financial coaching services
Opportunity to advise at scale for older millennials (29 to 59) and Gen X (40 to 54) who prefer on-line access and believe it results in better quality engagement.
Because personal recommendations are excluded from the non-intermediating financial planning (NIFP) process, The GAME Plan can be delivered digitally to individuals and groups:
Which makes NIFP a fully scalable digital solution for planning firms.
When did the digital NIFP process become fully scalable?
The market changed in the UK in January 2020. Investment returns became commoditised as Vanguard entered into the pensions market, mutual fund distributors began to struggle to add value. When distribution became commoditised, the opportunity arose for advice to separate as a service in its own right. For advice to stop carrying distribution.
Advice separated from distribution legally in Australia in 2019 and India in 2020.
This series of events, combined with trends in digital delivery, led to the birth of the global non-intermediating financial planning movement in March 2020, at the same time as the start of the covid-19 pandemic. A perfect storm to sink any UK adviser-distributor model.
Until recently the main obstacle to delivering a full end-to-end digital experience in NIFP was the lifetime cash flow forecast. All existing systems have been distributor-centric, that is built with the distributor in mind. While customer APIs have been introduced on some distributor platforms, e.g. Voyant GO, in practice these are far too complicated for end users.
Along came Envizage. Envizage have launched a simpler customer-centred lifetime cash flow forecast solution. Envizage, a WEALTHTECH 100 for 2020 firm, has partnered with the Academy of Life Planning (AoLP) to deliver this outside of an enterprise environment. See details of the Envizage/ AoLP partnership.
AoLP is the world’s first non-intermediating financial planner (NIFP) adviser support network. At AoLP, there is a wall between advice and distribution. AoLP delivers advice and leaves distribution decisions to the client; to choose either a mutual fund distributor or access to a D2C platform.
Adviser versus adviser-distributor, the conflicted cash-cow:
In the UK, two-thirds of mutual funds remain adviser-distributed, one-third via D2C platforms. In other markets, the D2C channel market share is far higher.
Adviser-distributors run conflicted remuneration models; 90% of advisers tap into the asset to charge c.1% based fees on the wealthy via wealth management products (fee income at risk in UK £5bn pa).
Wealth management products manage wealth for the wealthy; none create wealth for the unwealthy. People create wealth, not products. Unwealthy people need plans, not products.
Adviser-distributors just sell products. 90% of adviser-distributors run their own centralised wealth management products, studies show these fail to add value after charges compared to markets[i]. Direct schemes fetch far higher returns than distributor schemes, as intermediary fees cramp NAV.
All adviser-distributors are, by definition, agents of wealth managers. All wealth managers also tap into the asset to charge percentage-based fees. 90% of product providers are active managed and evidenced-based investor studies show these too fail to beat passive managed after fees, passive solutions are available for a tenth of the price.
Adviser-distributor thresholds are typically set at £100k of investible assets. 95% of people are disintermediated on account of their limited wealth, what the unwealthy need is wealth not products. Plans not products. Wealth creation plans. Business plans for side hustles, at a time when entrepreneurs have greater income security than employees.
Adviser-distributors can’t work digitally as agencies require wet signatures.
Adviser-distributors can’t scale, as each case requires a suitable personalised recommendation delivered 1-to-1, time is limited therefore the business is limited.
The regulatory risk is rising for adviser-distributor firms. Regulators globally are splitting advice and distribution, seeing the conflicts, seeing it as an incomplete transition from product seller to professional adviser. Example, Australia 2019, India 2020, etc.
Post-split, largest channel for distribution of mutual funds is D2C platform, e.g. India 48%.
Evidencing a global shift from adviser distributed funds to platform distributed funds, and a shift from active to passive managed funds. This has led to an increase in demand for NIFP.
The AoLP end-to-end digital proposition
The AoLP end-to-end digital proposition of integrated platforms is as follows:
Non-Intermediating Financial Planning using The GAME Plan Generator of The Academy of Life Planning Limited, integrated with a lifetime cash flow engine.
Customer-centred lifetime cash flow forecaster using Envizage, integrated with an open banking platform.
Using open banking provider Moneyhub, and risk profiling from Oxford Risk.
Integrated investment platform from D2C platforms market, e.g. Fidelity, integrated with Moneyhub.
Underlying passive retail multi-asset investments e.g., Vanguard or Sparrow Capital listed on D2C platforms.
This is our fully scalable digital end-to-end customer journey.
Other services from AoLP
AoLP is a network of non-intermediating financial planners around the world who share our philosophy. If you are an adviser or adviser firm seeking affiliation please get in touch. If you would like to be put in touch with an AoLP member firm in your area, drop us a line to tell us, briefly, where you live, what stage of life you’re at, and what you’re looking for from a financial plan. We’ll use this information to connect you with an adviser who can help you.
We can also be of assistance to UK victims of scams seeking investigation and asset recovery. We support individuals, companies and UK financial institutions seeking the recovery of money paid out on scam investments and recovery room frauds. One in two crimes reported in the UK are scam related. We are not lawyers, and we don’t give legal advice. But if you think that you have been adversely affected by these sorts of practices, we would be happy to put you in contact with a suitable not-for-profit asset-recovery firm. Simply email us, briefly giving details about the circumstances, and we’ll try to help you.
[i] BETTER. STRONGER. FASTER. HOW DO WE REBUILD CENTRALISED INVESTMENT PROPOSITIONS FROM HERE? A market insight report from the lang cat July 2020