WHAT DOES THE FUTURE HOLD…. .

Standing out from the crowd

Overview

Demographics are changing

Western population growing by less than 1% a year

Average age 40 to 45

Summary:

Aging and slowing population Markets are maturing and burdened by debt New generation coming through have less money and more

debt but want the same retirement as their predecessors

The market

54% of the population have no savings or investments, this will increase

Only 22% of the population are “active” risk based investors in the UK

Routes to investing:

3.4 million pure self-directed investors 5.4 million both self-directed and advised 1.5 million entirely advised

The market

Self-directed market, B2B2C* and phone based advice will take 50% of the market in the future

The number and availability of advisers is set to shrink

But:

80% of self-directed investors are not active, and are not interested in investments

Investors want advice but don’t want to pay for it, creating a perception that fees will be squeezed

*Self-directed offering sitting alongside advice model

Where now for the advice model?

Overview of the advice model

Greater moves towards a more professional vocation similar to the US model

Big emphasis on financial planning, maps and goals

But….there are challenges:

Everyone does financial planning IT IS JUST A COMMODITY The investment strategy delivers the goals however many

financial planners do not own the proposition Cost is becoming a battle ground where people don’t

understand the value of financial planning

Investment strategies

“Over 50% of financial planners outsource their investment strategy……this will increase”

What does this tell us?

Outsourcing is being used to reduce the pressures of running a compliant business with the audit trail required to run an investment strategy

Advisers are not reducing fees to reflect outsourcing, meaning the cost to clients is going up

As more outsource, there is going to be an acceleration in consolidation between investment solution providers meaning the world becomes dominated by fewer, bigger brands

More and more advisers are no longer making the investment decisions which drive the delivery of client goals

Reversing the trend

Reversing the trend

Financial planners want to own their own proposition but cost and compliance hinders them. Outsourcing seems the perfect solution. However:

Financial planners are starting to realise they are no longer in control of the whole client proposition

The client losses out as an extra layer of fees is built into the proposition

And ultimately as financial planning is recognised as a commodity, so will the investment strategy

Costs and identity

Costs:

A DFM solution can cost up to 1% p.a.

There could be a VAT liability in addition to this fee

“the total cost of investment outsourcing can cost the client in excess of 3% p.a.”

Costs and identity

Identity:

DFM & other solutions simply do not reflect the identity of the business

To “add-value” the investment solution must be seen to reflect the adviser’s business

“outsourcing of the investment solution in its current form does not reflect the business and is

not controlled by the financial planner”

Costs and identity

Reality:

Financial planners are still trying to charge the same fees but using outsourcing to reduce their costs….meaning the client pays more for no perceived benefit

Clients are now seeing this much more and starting to demand lower fees to reflect this outsourcing

The end result is that margins are squeezed and will get squeezed further unless financial planners take control of their investment strategy

Solutions and building blocks

How we look at financial planning needs to change

Financial planning is about road maps and accepting paths change

Financial planning is about taking responsibility for the engine that drives the client along the path

Financial planning is about having a level head when the rest of the world is going crazy

The new world

Being different

New solutions are coming out all the time…….

They are based around the past, and don’t consider the future

They don’t help with the aspect of time and identity, identity is crucial

In summary what is being offered is no different to what is already out there, it just has different packaging

Until now……

Being different

Consider an outsource solution which:

Enables a financial planner to retain their identity by delivering a solution which is their solution

Costs considerable less than a DFM

Provides all the compliance support needed to run the investment solution

Provides a comprehensive communication package including management of website and client updates

Being different

Its not been done before, until now.

LWM Consultancy offers………………

Being different

Provision of a high quality investment solution

Provision of the fund analysis, compliance back up and investment committee notes to deliver the solution

Information on the structure and rational of the investment solutions so that the financial planner can explain to clients about is what is being done and why

A solution at a fraction of the cost of the DFM service making it far more likely that clients perceive “added value” both from their advisor and from the performance of their investments

Key benefits at a glance….

Cost reduction

Retention of identity

Focus on core competence

Access to portfolio management

Communication strategy

The next step

Next step

Contact us:

George Ladds, Head of Operations, 0117 370 2494 or george.ladds@lwm-c.com

Paul Berry, Director, 0117 370 2490 or paul.berry@lwm.c.com