Virtual non-intermediating financial planning (NIFP) is a model for our times. Steve Conley, founding organiser of the Non-intermediating Financial Planning Network and founding CEO of the Academy of Life Planning explains why.
“This a first-class idea and much needed by all those people who have been left behind by previous changes to financial advice provision in the UK. I am certain that £45 per month is a great investment for many people out there. This cost could be recouped by your clients 10-fold when removing the cost of a traditional financial adviser with his or her high upfront fees and commissions. I wish you well.” – Danny Shiel, Senior Financial Consultant, Singapore.
Firstly, we are in unprecedented times during a global economic and public health emergency. In the absence of life & money plans under the UK’s advice gap, sixty percent of the public are fast running out of cash, and the remaining 40% are worried about the impact market volatility is going to have on their financial future.
A service that delivers life & financial guidance during stay-at-home orders is invaluable right now. That’s what NIFP is!
Many financial advisers are either serving the top 5% remotely, chosen on account of investable asset thresholds … or are serving no-one on account of watching Netflix or applying for shelf-stacking vacancies at Sainsburys.
The NIFP model can be delivered to a wider audience due to economies of infrastructure and scale, and can be delivered remotely as non-intermediating means non-regulated which dispenses for the need for wet signatures and verification of ID.
The question I ask is, could NIFP be more profitable for advisers, when compared to conventional advice models.
Non-intermediation – Cost or Benefit to consumers?
The first consideration is which service offers the greatest value for consumers, intermediation or non-intermediation. For the answer to that, you need look no further than the performance of active managers versus markets during the recent global economic crisis. Research shows that active managers have underperformed markets by 2% per annum, which is explained by the charges (see https://bit.ly/3b3nWMg). Add to this the cost of the in-house advisory or discretionary service, and it becomes clear that non-intermediation is the clear winner in terms of value add.
If the value of the advisory relationship lies in the planning rather than the intermediation, then it’s reasonable to assume that NIFP could be charged to consumers at the same price as intermediation.
“I absolutely believe in providing coaching and planning services that are completely independent of financial products and investment management. After many years, I’ve come to the solid conclusion that strategic financial plans can have far more impact on the lives of individuals, rather than a collection of often random, regulated financial products.” – Graham Wells, Chartered Financial Planner, Edinburgh.
How do margins compare?
Traditionally, an intermediation revenue distribution is a third for compliance, a third to the business and a third to the adviser as profit. With ever-increasing regulation and recent hikes in fees, levies and insurance premiums the cost of compliance could take up to 50% of revenues. Placing the split more like: Compliance 50%, Business 33%, Adviser 17%.
When we consider the economies of infrastructure and scale from a remote advisory model such as NIFP we can cut out 50% of the business cost, working from home, eliminating travel, going paperless, and so forth. The split for the NIFP model is: Compliance 0%, Business 17%, Adviser 83%.
This gives the NIFP model almost 5 times (4.88 x) more profit than the intermediary model.
The press likes NIFP too:
MoneyMarketing in Feb 2020
Citywire in March 2020
George likes it too. March 2020.
For more details visit: https://www.academyoflifeplanning.com/for-advisers/