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Client Service Proposition – New Generation Firms

In this suite of blogs: assessing new generation firms, we have now investigated 3 keys; what leadership, business strategies and stakeholder engagement focus is needed to build a professional services firm.

In many ways the 4th key, client service propositions can be the most tricky to get right due to the fact that this showcases the firms value to the client, (you only get one chance) and the proposition has to be calibrated with regulatory requirements, something many business development consultants tend to forget.

Our industry survey focused on issues such as platform choice, product research, service segmentation, assessment of client risk and positioning adviser charging.

With client impressions in mind, this research highlighted significant issues around design the business needs not the clients. This is illustrated with research tools such as risk profiling and fund research being driven by the end investment product used.

Indeed there was concern around synthetic risk reward indicators and calibration with client risk profiling, something the regulator are particularly hot on when it comes to advice suitability.

Evidencing a robust selection of enabling risk software, which will facilitate assessment of risk and reward. Once selected, ensuring its effective commercial and compliant use is essential.

It is also crucial that any service proposition enhances the client experience considerably. Indeed independent research by the CEB found that it isn’t the brand or service costs that motivate the clients to purchase financial advice but the experience they have in engaging their adviser firm.

Its also the little things that count, so by mapping out the service touch points with their clients, firms can ensure they maximise all opportunities to give their clients quality information about the services offered and ensure a highly personalised service.

When it came to adviser charging, a worrying 77% of respondents placed adviser charge facilitation as their only strategy. Also a large majority also charged clients up front with an annual trail charge with the initial charge at the implementation stage only.

A move to offering a balance of product charging with explicit fees (Time, Task, Retainer) can ensure clients really understand the fact they are receiving professional services plus the firm can be protect their cashflow when markets take a significant bath.

Very few firms took the opportunity to assess where clients are gaining the maximum value from the planning process. If clients are seeing huge value in the discovery meeting why not charge a % of the fee there? If clients see value they will pay and pay what firms ask.

From a regulatory stance it is now imperative firms understand the potential issues surrounding the selection of one of the 3 distinct advice processes in the market (HMRC, ISO, IFP) and their impact on client agreements, VAT and other issues. This will bring clarity of charging methodology and a due process to showcase the proposition.

One key area of the advice process is the review, here we have the opportunity to showcase exactly what has been done for the client and gain the clients commitment to the value added to their personal situation.

It is also imperative to include cashflow technology in the advice process, as this will facilitate a dynamic proposition for both the firm and their clients. The focus for this software is building a financial plan around client needs (not the firms), thus clients can explore their goals and aspirations and understand the trade offs that may need to be made to achieve them or indeed be surprised by the fact that with one or two tweaks they can retire early or buy their dream home.

With suitability in question, demonstration of due process around retail investment fund and platform choice, a investment value process document to illustrate investment services philosophy and demonstrating tailored service propositions that meet client needs is essential.

A method that we encourage firms to adopt is focussing on a ‘middle office’ i.e. bringing together the front and back office operations and practices that can showcase the real value of the proposition and demonstrate the firms alpha to their clients.

In our 5th and final post we’ll show how this can be achieved.

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