Solicitors - Why Refer
- 1. What’s in itfor them? What’s in it for them? Working with the Financial Planning profession A presentation by Basi & Basi Financial Planning
- 2. What’s in itfor them? Who are we? • A Flying History – 1994; Ady Basi qualifies as Investment Adviser – 2001; Ady Basi creates IFA Stop Limited – 2002; Michael Basi graduates and joins FCE Bank plc – 2006; Michael Basi rejoins family firm – 2010; Nicholas Basi graduates and joins family firm • Capacity – Three advisers and one trainee – Administration Staff • Focus on personal service to a few clients and their families
- 3. What’s in itfor them? Managing Wealth; Our Key Skill • Wide ranging term – what does it mean? 1. Ensuring a client’s financial assets support their life plans 2. Making investments work hard 3. Minimising tax due 4. Protecting succession planning • Focus 1; Asset Allocation – Split according to true level of risk client wants to take • Focus 2; Fund Selection – Using proven mathematical analysis, monitored daily • Focus 3; Tax strategies – Don’t let the tax-tail wag the investment dog!
- 4. What’s in itfor them? Invested is Invested, Balanced is Balanced?
- 5. What’s in itfor them? Lies, Damned Lie and Statistics • Prior growth proves a theory; service defines execution • Again, we focus on client service; – Unique Fee-based remuneration model – Disperses income over years of voluntary retention by client – Linked to their investment performance; they win, we win • Client can select service level: – Bronze – Silver – Gold – Platinum • Personal adviser access for all clients (Platinum: 18 hours per day)
- 6. What’s in itfor them? We are Independent - what does it mean? 1986 Financial Services Act polarises of financial advice Independent Tied 2005 Financial Services Authority allows depolarisation to increase high-street choice Independent* Tied Multi-Tied 2012/13 Retail Distribution Review recategorises ‘retail investment advisers’ Independent Restricted *must offer a fee option to be called independent – otherwise called ‘whole of market’
- 7. What’s in itfor them? Retail Distribution Review – your 10-second guide • Launched by the Financial Services Authority in 2006 • Aims to improve and modernise how investments are distributed to retail consumers in the UK • Three main goals: 1. Improve the clarity with which advisory firms describe their services to consumers 2. Address the potential for adviser remuneration to distort consumer outcomes 3. Increase the professional standards of investment advisers • Firms must be compliant from end of 2012
- 8. What’s in itfor them? Change is good....eventually “What doesn’t kill you makes you stronger” IFAs understand the headwinds facing the legal profession FTSE All-Share Index April 2009 December 2013 EC announces plans Minimum capital 4000 June 2006 to improve investor adequacy requirement Launch of the Retail protection for packaged for personal investment Distribution Review retail investment firms raised to £20,000 products (PRIPs) 3000 January 2013 2000 November 2007 Investment firms must be Implementation of the EU’s fully compliant with December 2005 Market in Financial RDR policy December 2008 FSA proposes principle- Instruments Directive (MiFID) 1000 based regulation All retail financial services firms required to demonstrate Treating Customers Fairly principles 0 Jun- 05 Jun- 06 Jun- 07 Jun- 08 Jun- 09 Jun- 10
- 9. What’s in itfor them? What will it require to be an IFA post-RDR? • From January 2013, an ‘Independent Financial Adviser’ must: – hold qualifications at a minimum level of QCF Level 4* – conduct a fair and comprehensive analysis of the relevant market when making product recommendations – have sufficient knowledge of all types of ‘retail investment product’ that could give a suitable outcome for a client – select products in line with the ‘client’s best interests’ rule (COB 2.1.1) – NOT accept commission from product providers – operate a product-neutral pricing structure • Basi & Basi Financial Planning Ltd is set to be in place long after 2013 *Qualifications and Credit Framework
- 10. What’s in itfor them? Maintaining your client relationship; Harnessing the full client lifecycle IFA activities shown in white; solicitor activities shown in orange Buy first Get Have Move Change Receive RETIRE house married family house jobs inheritance Mortgage/ Spousal Set up children’s Probate IHT & repayment advice tax-planning investments & CTFs Review Wills estate Conveyancing Write Wills Review trusts Review Wills planning Set up trusts Review trusts Lump sum investment Refinance Long-term care Client asset value Conveyancing Equity release Family cover Regular School fees Arrange Pension Pension Income Annuity savings planning SIPP maximisation/con de-risking drawdown purchase pension solidation Annual portfolioAnnual portfolioAnnual portfolioAnnual portfolioAnnual portfolioAnnual portfolioAnnual portfolio review review review review review review review Annual ISA Annual ISA Annual ISA Annual ISA Annual ISA Annual ISA purchase purchase purchase purchase purchase purchase 20 30 40 50 60 70 80 Client age
- 11. What’s in itfor them? Where do solicitor/IFA synergies lie? Anywhere where legal advice meets financial advice 1. Trust & estate planning Will writing Portfolio construction Balancing interests Trust creation & administration* Inheritance tax planning Probate Ethical investing Remember: Estate disputes (e.g. for charities) The Trustee Act 2000 obliges trustees to review any investments made with trust money on a regular basis and to Solicitor IFA obtain proper investment advice. * NB: Where acting as trustees, solicitors should not refer trust work to businesses in which they have an interest
- 12. What’s in itfor them? Where do solicitor/IFA synergies lie? 2. High-net worth clients Wealth management Trusts & asset protection Alternative investing Estate management School fees planning Pre-nuptial agreements Tax-efficient planning Corporate asset Pension planning structuring Insurance Solicitor IFA
- 13. What’s in itfor them? Where do solicitor/IFA synergies lie? 3. Elder care planning Long-term care insurance Power of Attorney Equity release Trusts product selection Will-writing Impaired annuities Equity release guidance Remember: Income solutions Only financial advisers that hold the CF8 Long- term Care Insurance qualification can advise on long-term care products Solicitor IFA
- 14. What’s in itfor them? Where do solicitor/IFA synergies lie? 4. Personal injury and divorce settlements Litigation Lifetime income planning Claims settlement Tax planning Award assessment Family financial planning Trust creation & Pension planning administration Insurance Solicitor IFA
- 15. What’s in itfor them? Where do solicitor/IFA synergies lie? 5. Corporate & employer services Employer & group Employment law pensions Corporate structure Employee benefits & Client/supplier contracts share schemes Intellectual property Workplace/director financial planning Remember: Selling/insolvency From 2012, employers will Insurance be required to enrol all eligible employees into a qualifying workplace-based pension scheme Solicitor IFA
- 16. What’s in itfor them? Using knowledge of our clients to build and enhance our businesses • Enables firms to both meet regulatory compliance requirements and build better businesses • Requires client information to be shared across the business and not kept to one adviser/partner • Technology essential to ensure data is up-to-date and easy to interrogate Client Fact Find 80 70 60 50 40 30 20 10 0 Pensions ISAs Bonds Cash Funds Ot her 1. Client 2. Sales Management 3. Client Fact Find Information segmentation Deep-dive knowledge of A real-time picture of a Build a business around every client business genuine client needs
- 17. What’s in itfor them? 1. The Client Fact Find – a powerstore of information IFAs are required to take reasonable steps to ensure that a recommendation is suitable for a client. Before making recommendations or managing investments, an advisory firm must obtain and document the necessary information regarding: • Client’s financial situation – including Client Fact Find - source and extent of regular income - regular financial commitments - assets, including liquid assets, investments and property • Client’s investment objectives – including: - length of time for investment - preferences for risk-taking - risk profile - purpose of the investment • Client’s relevant knowledge and experience – including - familiarity with relevant services, transactions and investments - nature, volume and frequency of transactions - level of education and profession Taken from FSA Conduct of Business Sourcebook Section 9.2
- 18. What’s in itfor them? 1. The Client Fact Find - maximising the advice opportunity Client assets Time horizons Are these all properly Are investment strategies balanced with a appropriate to the time left cohesive strategy? available for investment? (ongoing review) Client Fact Find Dependants and spouses Are all personal and investment allowances Risk profile maximised across the whole Is the current portfolio family? aligned with the client’s stated risk profile and preferences? Pension arrangements Are all these optimised in Financial commitments terms of Are assets and liabilities performance, charging being offset as efficiently as structure and ease of possible? management? Turning a regulatory requirement into a commercial and client advantage
- 19. What’s in itfor them? 1. The Client Fact Find – using it to target solicitor issues Wills Have wills been written by the individual and their partner and are these up-to- date (e.g. post-divorce or Client Fact Find birth) Estates Are there any assets to be passed onto a dependant/ family member. How are these currently protected? Transactions Does the individual face any imminent property, business Elder care or commercial transactions? Does the individual have any obligation to any older relatives – how are their future needs managed? With client approval, IFAs can share fact finds with solicitors, thereby providing them with regular and comprehensive client information
- 20. What’s in itfor them? 2. Management information (MI) IFAs use software and investment-platform tools to maintain a real-time picture of • Level of client activity – including most recent transactions • Client activity by adviser/office/whole business • Clients with unused ISA and pension allowances • Investment asset allocation by client/adviser/whole business • Assets held per provider provider/investment group/product 80 • Gross and net asset inflows/outflows 70 60 • Monthly/quarterly/annual revenues by client/adviser/office 50 40 • Client bank by age/AUA*/professional profile 30 20 • Transfer activity from/to other advisers/providers 10 0 • Length of client retention Pensions ISAs Bonds Cash Funds Other Assess individual Leverage client data Track profitability by Be alerted to sudden Identify potential adviser performance across the whole client/ adviser/office outflows of business risks (e.g. high client business exposure to high risk assets) *Assets under advice
- 21. What’s in itfor them? 3. Client segmentation – improve profitability, anticipate future business direction and give clients what they need Use the client fact find and This enables us to: Which in turn allows us to: business MI to segment & 1. Anticipate future needs across the cross-segment clients by: whole client bank accurately and Anticipate client needs position business accordingly Age by life stage 2. Increase retention of high-quality/high- Identify current and future Asset level/profitability value clients and increase referral of high net worth clients new ones Transaction frequency/ 3. Deploy resources efficiently to each objective/key concern area of financial planning and each Differentiate advice services/ client type Financial behaviour/ marketing/ portfolio complexity communications 4. Identify and build key areas of expertise by individual client needs to build clear proposition, culture and brand Professional profile 5. Ensure each client pays fairly for the service they require (i.e. no cross- subsidies)
- 22. What’s in itfor them? Segmentation in action For example, client profiling may tell us: Our key client segments are: 1. Young accumulators: - Provide tax-efficient, growth focused 30% of our clients are professionals in their strategies 30s-50s with fast-accumulating portfolios - Keep up to date with new investment opportunities and ideas - Focus on online servicing - Address life-stage financial planning 40% of our clients are over 60 with portfolios of £400,000+ 2. High-net-worth retirees - High touch relationship with focus on regular face-to-face contact 10% of our clients are annual ISA buyers - Focus on tax and estate-planning with few other assets with us - Income and risk-averse strategies - Strong potential for client referral – including from family members 3. Transactional investors - Focus on efficient but low-cost servicing - Email with investment ideas and stock market commentary - Invite for portfolio review and assess consolidation potential
- 23. What’s in itfor them? Other potential joint activities Client newsletters Client & prospect seminars Workplace advice • Budget updates • Planning for a secure retirement • Getting the most from your • End of tax year ISA and pension pension reminders • Managing a divorce • Employee share schemes • Stock market reviews & • Funding old-age care model portfolios • Life-after-work planning • Passing on your estate • Personalised portfolio • Wealth management for • Asset protection (HNWIs) reports and valuations directors
- 24. What’s in itfor them? What’s in it for you? 1.Reinforce long-term high-value high quality client relationships 2.Attract more clients within your preferred market segment(s) 3.Improve levels of client referral 4.Increase levels of business from existing clients 5.Maximise efficiency and profitability 6.Build a holistic advice proposition Transform threats to the legal sector into opportunities- The forthcoming changes are a welcome reminder of the need to change in a positive manner.