Time and emotion

Putting the client first should be at the heart of all businesses. And since the advent of the Retail Distribution Review (RDR), it’s been more important than ever for financial services. Advisers must now develop a deeper understanding of clients’ needs and engage with them at an emotional level to build a bespoke strategy, says Roger Brosch.

“We’re big believers here in EQ as well as IQ,” says the CEO of Foster Denovo. “You need the technical capability or certainly access to it if you don’t have it at your fingertips, but for
me EQ is probably what this industry is best at and needs the most. It’s having empathy and understanding and helping clients connect emotionally to their financial objectives that is vital.”

It’s not easy, though, and there must be a balance between assisting with decisions and imparting knowledge, he adds. ‘Educating’ clients is tricky because it can seem condescending, so the focus should be more on creating and building awareness and ensuring clients understand results in the context of their own life.

“It’s about empowering somebody to make good quality decisions that will, in turn, influence and change their financial lives for the better.”

Empowerment is a quality Brosch values highly. It was something that attracted him to financial services in the first place. After working in the comparatively slow FMCG industry, he wanted to take control of his destiny and reap the rewards of success. It’s a philosophy his firm instils in clients.

“It isn’t always on the tip of their tongue when you start talking to clients about a long-term future,” he says. “Cash flow modelling can help with that. Just making small adjustments to the way their planning is structured and the dramatic difference that can make in the medium term is powerful information. You can see them becoming empowered, taking more and more control, believing there is a positive outcome they can achieve.”

Quality not quantity

Brosch says many propositions are taken to market that begin with – and are controlled by – ‘the system’ or a technology solution, but advice should always start with the individual. “It’s trying to build something that works for the client then providing the support and systems behind that to bring it to life.”

Choosing the right people to service is important too. “You obviously need to be very careful about selecting your target market,” says Brosch. “There needs to be a sensible commercial outcome and that means working with clients who value and can afford these services.”

Career ladder

• 1985 Regional sales representative, Rothmans International
• 1986 IFA, Financial Planning Services
• 1990 Senior branch manager, regional director, General Portfolio
• 1994 Regional director, Generale Assurance Nationale
• 1998 Senior partner and founder, Millfield Partnership
• 2005 Chief executive officer and founder, Foster Denovo

 

Adapting to fees has been another hurdle. “Clients historically have taken advice – but I’m not sure many have even thought about how it was being paid for; clearly they weren’t writing a cheque for it. Broaching and bridging that has been a challenge for some advisers.”

RDR, which took effect from January 2013, was a major turning point for financial services: firms prepared to remodel their business were given a new lease of life. It has left others facing possible closure or merger.

Brosch got the RDR-proofing ball rolling around 2010 enlisting a business transformation team to help write a new strategy and, significantly, started talking to clients about what was happening. He believes firms that haven’t adapted are likely to fail in the new era but the emphasis is on how well they can handle the pace of change.

Evolution rather than revolution is the way. “The industry has been pushed through more of a revolution in the last three or four years and that has put some business models under huge pressure,” he says. “It doesn’t seem to be slowing down, unfortunately, so I think that is going to cause more issues and will be part of what leads to further consolidation.

“A big part of running a business successfully is anticipation in the medium term, so it’s looking at the clues you’ve got today and having those conversations early when you’ve still got an asset with a realisable value that you’re in control of and that you can actually make some robust decisions around.

“When that control is taken away from you, for whatever reason, regulatory or financial, you lose that control and that to me is the critical piece. Consolidation can be a really positive thing if it’s done in a controlled environment. If it’s done when you’re out of control, it’s not good for anybody, particularly clients.”

Future financial advisers

What’s especially worrying is the lack of new blood entering the market, which a recent survey conducted by the firm alluded to. The average age of advisers is on the increase and it’s a real concern, says Brosch, who is determined to find the next generation of professionals, develop them and, notably, retain their skills and talent.

His firm has an academy programme taking on three or four new starters each year, beginning as administrators and working to become paraplanners and upwards to full adviser.

Essentially, Brosch believes in sharing opportunities for the greater good. Foster Denovo is a limited company in legal status but works very much as a partnership. Its buyout of the Tenet Group in 2007 was funded internally – just short of £3m was raised from partners and staff.

He puts the firm’s resilience down to this combination of a partnership culture, stakeholder community and commitment to people development. “We’ve always had a very clear vision of the type of business we want to be, based on some deep-rooted foundational values. These sit under the headings realisation, reward, regime and relationship, which I talk about all the time,” he admits.

“But it’s really important because that’s how cultures develop when there’s absolute clarity about ‘what of me is in it’, not just ‘what’s in it for me’. The values must fit the person then the culture works really positively for all stakeholders, particularly clients.

“You attract like-minded, value-based people to the business, and it gently pushes away people who don’t share the same values. You end up with a really powerful concentration of like-minded people who understand and are committed to the business outcome.”

More to come

Looking ahead, the industry will continue to go through “a painful transition” for the next one to two years, he says. And there will be greater opportunities for mergers not just in the advisory space but also in product provision and investment fund management.

“What’s really interesting is that good quality advisory businesses will be able to take more and more control over the advice process and the value chain: packaging up products that are right for their client, rather than what a provider wants to sell.”

And the challenges ensue. “The regulator continues to throw difficult challenges for us to deal with,” he says. “The OFT report now wanting to remove commission completely from the corporate sector is going to have a huge impact on many businesses, particularly advisory businesses and their clients that have become dependent on it.

“The whole world has got to change in the middle of what is already a massive upheaval. So there’s still an awful lot to work its way through. We’re sensible about the growth strategy. We’re certainly not looking to rule the world or looking to build too quickly. It is about quality in today’s market not
just quantity.”

Sometimes, the bigger the challenge, the better, believes Brosch, who has always been a keen sportsman and coaches at his children’s local rugby club. There’s never been a dull moment in financial services and this has been a great motivation. Ultimately, life’s all about things that test you: hitting a benchmark then moving on, he says.

“What’s interesting is there is an advice gap and we have the ability to deliver advice – that’s a great combination for a successful business.

“There’s [reportedly] about 20,000 advisers in the UK, but over 140,000 accountants and 150,000 solicitors, so it says to me there is significantly greater demand and need for the sort of services we provide. What a great opportunity?”

Jennifer Palmer-Violet is editor of Private Client Adviser