I love music. I find it unsettling when I ask people what music they like and they say: “Oh, I don’t know really – I like a bit of this, and a bit of that… I’m not that bothered.” Inside, I am screaming: “How can you not get more excited about music?”
Nonetheless, we are all different and I get that. I really don’t get excited by football, which will baffle a lot of people.
My problem with music is that I am not very cultured so I need recommendations, which is why I loved Our Price record shops.
The people working in Our Price would chat with you for ages about music. They would probably check out your clothes and hair and have a pretty good idea of the kind of music you wanted before you said anything.
They could then point you in the right direction because they knew a lot about their subject and, most importantly, their stock. They could run a cross reference between what you might like with what they sold.
Sorting out the muddle
This, using one of my famously tortured analogies, is one of the benefits of segmentation for financial advisers.
It is almost impossible to satisfy the new product governance – or Prod – rules (and they are rules, not optional) without good segmentation.
Before we go anywhere else, there are lots of articles around that feel like they are trying to scare advisers about Prod and segmentations, but please don’t be scared.
It doesn’t need to be complicated and a lot of these articles get one big thing wrong: they muddle service proposition and segmentation.
These are very different things, which I will run through in a subsequent column another time.
In reading Prod, however, it strikes me that the rules – and in fact everything that has happened since RDR – have really shifted the balance of risk (commercial risk, not investment risk) away from the adviser and back to the client.
In the past, if a client popped in to see an adviser, the promise was ‘I will get paid by commission to give you independent advice.’
That is so vast that the client’s expectation of what they got would be almost impossible to manage.
The reason was that clients were not segmented. They were not separated into groups with shared characteristics.
Now, however, with good segmentation, it is possible to build a service, a process, an outcome and even a broad expectation of providers around these shared characteristics in groups of clients.
When an adviser tells a client what they get for their money, it is possible to be specific and remove any potential for badly managed expectations leading to unnecessary complaints.
Don’t be scared by Prod, centralised investment propositions, research and due diligence. They are all just processes that help you spend more time with clients.
Damian Davies is director of The Timebank