“If you plan for one year, you sow grass; if you plan for 10 years, you plant trees; if you plan for a lifetime, you train people.”
In recent years much has been discussed and legislated on the remuneration of independent financial advisers. Typically, IFAs eat what they hunt. They tend to hunt for the most remunerative business. The best salesman – not always the best financial adviser – often becomes the most nourished.
Unfortunately for investors, highly remunerative business does not always align with client interests. This asymmetry has given the industry a mixed reputation, even though, over several years, any fee structure rebalances itself towards average market accepted levels.
However, rebalancing incomes does not necessarily build a more sustainable IFA business. Any real solution to inherent asymmetries in any advisory business for fees needs to lie with the advisers themselves. They are under increasing pressure. In the old days, life was easy: you chose in good faith an investment or a policy or a bond and assuming some experience, achieved a reasonable result for your client over the long term.
Not like the good old days
Today, market complexities have exploded: investment opportunities are abundant and diverse, which increases the range of investment complexity; add in increased volatility of markets and the often opaque risk analysis and performance statistics and you have a profession which the ‘old days’ did not groom you well for.
Moreover, the individual adviser today needs to deal with a more sophisticated front end, namely partially- or well-informed clients. With huge volumes of investment analyses, constantly new product features, demanding compliance rules and the back office with an ever increasing administrative burden, the skill requirements for an IFA increased dramatically.
In this environment, the average IFA relies on what he or she knows and, if in doubt, what pays rapidly. The result is, very often, suboptimal for clients and IFAs.
Time for an upgrade
Addressing the skills issue effectively requires three levels of effort: one, upgrading advisers to today’s external and internal requirements; two, aligning clients with adviser competencies: and three, providing ongoing development support. This seems rather obvious but has stringent consequences in the way we pursue our business.
In addressing the first issue, we divide our advisers into four groups: paraplanners; qualified consultants; wealth managers, and ‘the trusted adviser’ who is often a well-established industry professional with both an academic background and the commercial success.
To become qualified to provide client advice, consultants must pass three basic Chartered Institute of Securities and Investment (CISI) examinations.
As they progress in their careers, they pass further examinations up to the level of Chartered Wealth Manager or beyond. Moreover, all need to pass internal exams on company specific philosophies and procedures. Thus we ensure that all advisers are qualified regardless of the specific legislative environment.
On the second issue, we align clients and their advisable choice of investments with adviser competencies. At first, advisers are restricted to model portfolios and therein to a limited choice of investments defined by a senior investment committee. This suits many retail clients very well and allows advisers to be effective from the moment they qualify.
Qualified advisers have discretion to recommend other investments, also approved by the investment committee, for some 20% of the portfolio and wealth managers have some 40-50% discretion. As an override, all investment allocations need to follow a general allocation model based on the advice and analyses from some of the best and most successful multi-asset managers.
Power to the people
To augment our commitment to people, we created the Mondial Academy, which has a dean – Gordian Gaeta, Mondial non-executive director. The academy pursues two goals: one, we are licensed to teach CISI courses and thus provide our people in-house training capacity. Two, the academy provides continued professional development with externally sourced or internal lectures. This ensures ongoing education. The academy also provides training curricula to outside parties such as other IFAs, private bankers or investment analysts/stock brokers.
This three-pronged approach to people embeds our advisers in a framework dedicated to their continued development and to optimal client solutions. We plan for a lifetime and believe that investing in people means investing in clients – this combination does indeed create a sustainable and well reputed IFA business.