Product Centred Financial Planning is where you treat the money as
the client, rather than the customer; and Client Centred Financial Planning is where you treat the client as the customer, rather than the money.
Product-Centred Financial Planners:
- These are adviser-distributors, that is intermediaries holding agencies with product
- The advice of these advisers is limited to product advice.
- ISO 22222:2005 defines the personal financial planning process (for product advisers)
and specifies ethical behaviour, competencies, and experience requirements for personal financial planners.
- These advisers are PRISM sellers. Protection, retirement, investments, savings, and
mortgages. That is, they seek to establish shortfalls in these product areas through needs analysis. They recommend products to fill the gaps.
- Eight out of ten of these advisers charge initial asset-based fees. Nine out of ten
advisers charge ongoing asset-based fees. They earn fees based on a percentage of assets sold. There is a transactional focus. Remuneration is conflicted. Here the adviser is always seeking a product
sale, as that is how they get paid.
- Advisers are sat on large books of a legacy assets taking clips on funds for doing a
lot, a little or no work. There is a lot at stake financially for the adviser and their family to switch to different models.
- Conflicts exist between their own interests and those of their clients. Advisers must
wrestle with their own conscience about client outcomes. For example, if a client enjoys a windfall should they pay down the mortgage or invest? If they did the former, the adviser does not know how
they would be paid.
- These planners manage wealth, rather than create it. Products manage
- Investment returns are lower on mutual funds accessed through these advisers, as their
fees clip the net asset value.
- These advisers target the rich by setting investable asset thresholds below which they
will not engage with the client. These advisers disintermediate ninety-five percent of the population on account of their limited wealth.
- This route is heavily regulated. Advisers are registered so their conduct can be
monitored and managed.
- Consumers here do not have their lives well planned and are asked instead to hand over
their assets. Trapped on the treadmill of work existence for the best part of 50 years, so advisers can tap into their assets with the promise of finding the happiness in the last sixteen years. A
bet most will lose.
- Over the lifetime of multiple adviser relationships, consumers are left with, often
forgotten, orphan assets in closet-tracking high-charge funds. Or are churned from platform to platform incurring unnecessary adviser fees and transaction charges. Data is captured and replicated on
multiple distributor platforms adding to the cost. Arrangements are inefficient and not portable.
- Four in five of these advisers are carrying out regulated business on behalf of
someone else, either as an appointed representative of a network or an employee of a national or one of its subsidiaries. These other parties also seek to tap into the client's assets and take their
- Here there are many layers of unnecessary middlemen tapping into client assets:
intermediary, intermediary back-office system, intermediary network, intermediary centralised investment proposition, an intermediary platform, product wrapper managers, collective investment
managers, underlying investment managers, custodians, nominees, stock exchanges, traders, taxman, and more.
- These networks and nationals run their own centralised investment propositions to clip
net asset value, a practice known as “asset hoovering”. They hold billions of pounds in these propositions. St James’ Place £13bn. Quilter £10bn. Hargreaves Lansdown £7bn. Openwork £3bn. Tenet,
Succession, Investec, In Partnership each £2bn, etc.
- The life companies and asset managers where the client’s funds are placed hold shares
in the networks and nationals, so double clipping the client’s assets for fees.
- Advisers using centralised investment propositions often portray themselves as
“independent”, when clearly they are not.
- The networks and nationals insist that advisers levy asset-based fees and
fee-for-service is often prohibited. These nationals and networks ban advisers from setting up separate Client-Centred firms.
- The cost of this advice is high, due to being one-on-one, hassle, red-tape, cost of
regulation, and multiple fingers in the pie.
- For an ever-increasing premium, this advice is protected by insurance, an ombudsman,
and a compensation scheme. Provided the adviser is acting within permissions, has paid the insurance premium, and is still in business when the claim is made. Often investors lose such protection
when things go wrong. In the UK only 20p in every £100 lost in investment scams is ever recovered.
- This advice market is a cash cow with the market outlook
Client-Centred Financial Planners:
- Non-intermediating financial planners are not agents of product
- The advice of these advisers is limited to generic advice and financial
- They act as fiduciaries. Those who place the client's best interest first. They are
the best regulators.
- These are fee-for-service advisers. Relationship-based.
- All they sell is plans. For the unwealthy, the need is often to create wealth. These
advisers provide wealth creation strategies in their financial plans.
- Because advice is generic, they can advise groups in training classes or even remotely
with eBooks and videos. This lowers the cost of advice provision. Democratises financial planning to the masses and plugs the advice gap.
- Where products are required, these advisers educate the client on how to use
direct-to-consumer platforms to access commoditised investment returns.
- Investment returns are higher than the intermediated route, as there is no fees
clipping net asset value.
- There is no risk of mis-sale, as there is no product sale. There is no need for this
route to be heavily regulated. These advisers are often not required to be registered with a conduct monitoring authority. They are the client’s best regulator.
- Here the data sits with the consumer on a client-centric platform, as it should in a
GDPR compliant world. Data is captured once and shared with multiple advisers at any one point in time or along the historical lifetime. Lowering transaction costs and improving customer lifetime
values. The model is efficient, and adviser relationships are portable.
- Many hundreds of thousands of pounds can be saved by consumers over a lifetime by
removing unnecessary fees of middlemen.
- Consumers can plan a more contented life.
- The cost of this advice is low, cutting out red tape and the need for
- There is no specific advice about the buying or selling of investment products. There
is no premium for insurance ombudsman or compensation scheme. There is no mis-selling as there is no selling. The adviser is unconflicted and acts as the best regulator on behalf of the
- This advice market is a rising star with market drivers politically, economically,
socially, technologically, legally, and environmentally all acting in the adviser’s favour.
Contact us to find out more.