The big squeeze: how can financial advisers counter shrinking margins?

By Helen Fisher on June 15, 2018

Ways for financial advisers to stay profitable in challenging times

There is the argument that as long as people need money, they will need advice on what to do with it. However, this is clearly not a time for financial advisers to be resting on their laurels.

For example, robo-advisers are bringing an increased level of competition to the table – in a twist of fate that would not seem out of place in a science fiction movie, the tools that were initially designed to help advisers are potentially looking to step into their shoes.

The impact on financial advisers, both the independent individuals and those in large wealth management organisations, is an increasing squeeze on margins and profitability.

And it’s not just brought about by the competition.

Compliance costs can be high, as Financial Conduct Authority (FCA) fees continue to grow. A report by the Apfa found that firms with an annual income of less than £1m were spending on average 3% of their income on regulator fees and levies, and 9% on indirect regulatory costs.

So, how can financial advisers stay profitable in these difficult market conditions? Here are some areas on which to focus.

Review your customer base

Who are your customers today? And even more to the point, who will they be tomorrow?

Millennials are not necessarily the easiest sector to attract, but they are now in their 30s. We can no longer call them tomorrow’s customers, you need to be winning their business now.

Take a critical look at your buyer personas. Are they reflecting the clients that you really need to be attracting? The thing about millennials is that to them, the credit crunch, rock bottom interest rates and subprime mortgages are normal facts of life, and they’ve never known any different.

As well as considering what they want, you need to get into their heads and understand what they expect. They know how robo-advisers work and what they deliver – so why will they come to you?

Attracting the business of the millennials calls for a blend of technological tools and platforms, with the addition of that personal touch that only you can bring.

Strengthen your digital presence

If you have a tendency to glaze over when people start talking about digital marketing, you’re not alone. But here’s the thing: this is the way to make your marketing efforts deliver, and turn warm leads into hot prospects, at minimal cost.

One LinkedIn endorsement can be of untold value to your business, as you never know where it will lead. If the idea of social media for business fills you with horror, you might want to employ the skills of a consultant to help you, initially at least.

Get the priorities right

Time is money. It’s a cliché that you hear day in day out, but in the advisory world it is the truth. Are you spending yours as productively as possible?

Priority management is key to improving productivity. When everything is a priority, you can end up chasing your tail and achieving nothing, so try to focus on one key priority at a time.

Increasing focus in this way can lead to a domino effect – complete one priority, and the next one swims in to focus, and suddenly the wheels of your machine are rolling more effectively and efficiently.

Priority management also means understanding that you can’t do everything. In the US, they have a great term for this, which is offloading the rinky dink. It says it all – when you are operating a small business, it is easy to get caught up in the minutiae and to spend increasing amounts of your day tied up in activities that are not generating revenue.

Make the most of whatever support is available to you and make your rinky dink someone else’s number one priority.

Consider outsourcing options

On the same theme, it is worth critically assessing how much time you actually spend providing financial advice to clients, whether it is in face-to-face meetings, over the phone or by email. Creating more diary space to do more of what you do best is key to improving margins.

If you’re spending more time preparing reports and researching financial products than you are delivering client-facing services, it’s time to find someone else to do the legwork on reports.

You might also consider outsourcing those activities or areas that fall outside your immediate sphere of expertise.

Moving with the times

There are plenty of scare stories in the press about automated solutions taking over a wide range of industries, and the financial advice sector is no different. The key to ongoing success is to ensure your business evolves with changing times to remain relevant and to operate as effectively as possible. You can do this by taking advantage of financial advice lead generation services such as Lead Tech to get ahead of the competition.

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