The business case for a ‘Head of Financial Advice’

By Tony Slimmings

I really shouldn’t need to make a business case for regulated advice firms to make one person solely responsible for the quality and reliability (consistency) of their advice delivery. A person who focuses on the end, the right client outcome! Sadly few firms do this as they allow individual professionals to focus on different elements of this ‘advice system’ and then wonder when things go wrong.

Many CEO’s or business owners will claim to have this covered by pointing to their compliance team or office manager. I have very much respect for the amazing work these people do, but they have no experience in delivering financial advice other than ensuring the right boxes are ticked.

Let me state the bleeding obvious, financial advice is at the centre of what every financial advice firm is offering. Many business leaders may get pulled in numerous directions and spend a copious amount of time dealing with regulatory, operational and customer service issues but ultimately, these businesses will only prosper if they deliver profitable and consistent financial advice.

I believe advice firms need to look at their product ‘their advice’ as one continuous system. With the best will in the world the best of systems can and do fail, however, the easiest way to ensure it fails is to have different people responsible for different elements.

Your advisers, your compliance people, your file checkers, your paraplanners, your administrators etc. are all part of this system. All well-meaning and all believe they are pulling in the same direction. As an adviser who has ‘enjoyed’ feedback from numerous faceless ‘file checkers’ or compliance people, my experience is that they are ensuring they do their job ‘correctly’. The vast majority of systems, templates, checklists and processes within financial advice firms have been developed in the best interests of complying with the regulator. In fact I would go as far as to say that the majority of suitability reports are written for compliance people not the end client!??

Dealing firstly with your propositions. Your Central Investment and Retirement Propositions (CIP/CRP) and central research documents (CRD) (shortlist product panels etc.) are vital to ensure the consistency of your advice. These documents should clearly set out repeatable and appropriately researched solutions that will meet the majority of your client’s needs. The detail of these documents is vital in evidencing suitability, whether that be around your accumulation and decumulation strategies, advisory vs DFM, platform selection etc.

As well as these, your service proposition needs to be fit for purpose, thus ensuring each segment of your clients benefits from the correct level of service.

Your reviews may indicate that some clients need a higher level of service, whilst others may be absolutely fine with a light touch approach. But you can use the information to demonstrate why your proposition is appropriate, and ultimately how it adds value.

Each area of your advice framework needs to be reviewed and all processes recorded. They also need to work together to ensure your fact find, your risk assessment processes and your suitability report templates etc. all combine to ensure your advice is delivered in a consistent manner.

Training and Competency tend to be the domain of your compliance officer or office manager, however, I believe this is an absolute key part of ensuring your advice is delivered in a consistent manner and should fall under the remit of your HoFA. T&C is key in terms of driving what ongoing development needs they have and allows you to evidence that your advisers have rounded competency in all areas of advice, including collecting soft facts and assessing risk in a consistent manner.

Another essential part of the HoFA’s role is to check and review your advice itself. This allows them to identify any common trends with advice and file failings, and help you tackle the root cause, which may be the adviser themselves. Often seen as something to outsource to your compliance officer or outsourced firm, ‘file checking’ is a key quality control measure that needs to be under the remit of your HoFA. Although the quality and reliability of your advice needs to be built into the system it is essential that any file audits are used to feedback and improve this system. These file reviews then feed into the T&C scheme, the advice processes, how you evidence suitability and your propositions in a self-improving cycle.

So far I have talked about the ‘financial advice system, without maybe really defining what I mean by a system or ‘Systems Thinking’ if you will. This to me, along with a core understanding of what good client focused financial advice outcomes look like is an essential skill of any HoFA.

“Systems Thinking is accepting that every system is connected to every other system in some way and also that every system is a temporary man-made concept that will only survive as long as the people within the system accept the current system boundaries.”

I believe my definition captures the full essence of how I approach Systems Thinking. I believe that once you accept that every system is connected to every other system in some way you will become open to accepting the currently impossible as a possibility. By accepting all systems are connected the prevalent ‘silo’ mentality in the majority of systems disappears and you become focused and aware of the importance of your actions (regardless of position in the hierarchy) on achieving the system objectives.

I strongly believe organisations of all sizes that embrace and encourage systems’ thinking throughout will be the success stories of the future, not the ones that are first to market with the latest techno-gadget.

Many advice firms will be too small to justify an employed full time Head of Financial Advice and would benefit more from a few days of external support each month. Tony currently has openings for a few additional clients. If this is something of interest please get in touch at [email protected]