Research from Wellian Investment Solutions has indicated that the main struggle advisers are confronted with when trying to cut costs is the ability to initially identify where in their client portfolio they can make cost savings. Therefore, Chris Mayo, Investment Director at Wellian Investment Solutions has suggested that before trying to cut costs in other areas, advisers should adopt a strategy for ‘segmenting’ or categorising their client base according to the level of ongoing service they require.
He recommends that clients are categorised into three groups, ranging from the clients needing a very close relationship with the adviser, to those whose requirements could just as easily be serviced with a small amount of the advisers time. Mayo says that this simple process of client segmentation will help advisers to effectively identify where they are able to make the most considerable cost savings.
Once advisers have identified the most suitable areas of the business to outsource, Mayo recommends three key areas for advisers to consider. These include the use of platforms, the use of DFM’s and the role of compliance.
Mayo says:
"The current downward pressure on pricing means advisers need to attract new clients as they may not be able to charge the same price for their services post RDR. Therefore, the best way for advisers to remain profitable is to first accurately identify and then focus on the most high value areas of their businesses, which are maintaining and creating relationships with new and existing clients then finding ways to outsource the rest. However, there is still a degree of nervousness around outsourcing for most advisers, which is a real issue as it is ultimately the best way for them to make real cost savings."
"However, before making the decision to outsource any part of the business it is vitally important to review your client base and do your research thoroughly when deciding which DFMs to partner with so you can make sure you are going to be allocated to an Investment Manager who is dedicated to keeping you updated as regularly as possible. For that reason, most small firms prefer to partner with someone locally, to ensure they are not at risk of being cut out of the process altogether."
