Establishing an advice firm in a specific market

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Jul 12, 2019

There is plenty of generic information on setting up an advice business but what do you need to know within particular market segments? Three advisers share the benefit of their experience.

Digital advice

More people are realising that hybrid propositions that combine digital advice with human intervention have their place. Andrew Firth, one of the co-founders of digital advice firm Wealth Wizards, took an orthodox approach to setting it up back in 2009 in that it still had to do all the usual things, such as apply for FCA authorisation.

“The big difference is that we have significantly more software engineers than financial planners. We have 14 chartered financial planners and a lot of what we do means we still have to have customer services and people in the office talking to people. But upstairs there are 25 software engineers working on the websites, the tools and the way we do advice,” he says.

The firm has realised there is more demand for digital advice from employers that want to deliver it to their staff, rather than individuals buying it directly off the internet, so it has refocused on that section of the market.

What tips does Firth have for advisers interested in setting up an automated advice proposition now?

“Wherever possible, use existing technology platforms, as you can do an awful lot with the capability already in the marketplace. And choose a market you think is underserved, tailoring everything you do to that.”

The female perspective

Susan Hill Financial Planning founder Susan Hill has always worked on her own – with an assistant who manages the practice – mainly because, historically, there have been so few women to work with. However, she says if she was starting out now she would set up a business with three women working together.

“Set up a limited company with equal shares: one or two to be client-facing FCA authorised, while the third runs the business and the back office. Most businesses fail because they have no or inadequate systems in place and are badly organised, so someone with great organisational and technology skills is a powerful part of the success.”

Hill is a member of the TenetConnect network and says new chief executive Mark Scanlon is receptive to ways of helping more women become advisers. She recommends women starting their own firm join a network as an independent adviser.

“They will provide the regulatory top cover, capital adequacy and the compliance processes you need to start out safely and compliantly,” she says.

One thing Hill would never scrimp on is the cost of a good website, as this works like a shop window.

“Women like to research, so they tend to look around a website, then Google the firm or advisers, look them up on LinkedIn and so on. If they are happy, they like to make the first contact,” she says.

“Building a website shouldn’t be solely about cost; it should be the result. So, don’t be afraid to ask a few website builders for an indication of what they could do for you – and don’t be tempted to engage your best mate’s mate’s friend who can do it on the cheap.”

The central London experience

Costs and competition among firms in central London may be high but the capital is arguably one of the best places to access the wealthy clients who represent the ideal for many advisers.

Matthew Smith, director of central London advice firm Buckingham Gate, says: “I guess London is more expensive than elsewhere but all locations have pockets of wealth and you need to bear that in mind.”

When starting out, it is tempting to think that friends and family will generate enough clients to get going, but Smith says this is unlikely to be the case.

“Have a robust method for acquiring new clients,” he says. “Friends and family say all the right things but when it comes down to it they don’t want to do anything.”

Client relationships that generate extra referrals take a long time to develop but the cost of maintaining a business – particularly in London – does not easily allow for that.

“Even if you have robust marketing and new client enquiries coming in, everything takes time. And you have the cost of keeping going, successive regulation and the issues in the professional indemnity insurance market to contend with,” says Smith.

Buckingham Gate was directly authorised at inception but Smith’s recent PI increase has made him think joining a network would be a better option for advisers starting their business today.

“Before our PI renewal I’d have said I would never dream of joining a network, but I think now, if I was a one-man band working out of a bedroom, I’d be inclined to go with one of the better-quality ones like Best Practice,” he says.

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