"To understand being ‘customer- centric’ is to ensure that building scale and growth is completely aligned with what the regulator expects to see in terms of delivering good customer outcomes."
Milton Friedman’s philosophy, “the social responsibility of business is to increase its profits”, still holds true and for a company to make money it must have a product and/or service for which people will trade their money. However, becoming a truly sustainable organisation means increasing public approval and understanding, as well as improved brand reputation and faith in the company. Simply put, customers who engage generate more revenue.
The number one ‘do’ for us at Sandringham is to build a business with scale that is truly customer-centric. In business, however, things don’t just happen, you’ve got to make them happen.
Businesses associated with standing still are those associated with comfort zones, stasis and torpor. Many firms simply continue along the same path, doing the same thing repeatedly and hoping for an improved outcome. However, doing the same thing over and over again usually secures the same result – over and over again.
There is a real need for scale in our industry. Businesses should exist to exploit the benefits of being big and to maximise efficiency through economies of scale. It’s a plain fact that the bigger a company grows, the more experience it accumulates; the trick is to use that experience to improve performance, particularly when it comes to costs. Efficiencies of scale are about ensuring that every £1 of additional revenue earned does not equate to £1 of extra cost.
The fact is that for us and for thousands of other businesses, the key to sustainability is to grow. In this respect, and whether you choose to believe it or not, our profession is no different to any other business in terms of what drives a successful enterprise. Certainly, we can talk about the challenges of working in a regulated environment, but to understand being ‘customer- centric’ is to ensure that building scale and growth is completely aligned with what the regulator expects to see in terms of delivering good customer outcomes. With an absolute focus on the needs of the customer.
To understand Sandringham’s emphasis on scale requires an awareness and appreciation of the deficiencies that we still see in the delivery of advice:
• It’s expensive to run an advice firm and to do it right. Just think about all the effort that goes into producing what looks like a fairly simple suitability report. The focus needs to be on generating a report that delivers for the client but doesn’t guzzle up hours of time, manpower and cost.
• There is margin pressure due to a shortage of highly skilled advisers, who have begun commanding higher salaries. Our emphasis is to look at the way we are providing services, to ensure they’re the ones clients want and need. This might mean moving away from face-to-face, not necessarily to robo-advice, but looking at how we deal with clients.
• The squeeze in margins is reflective of advice firms failing to keep pace with the market as it evolves around them. This points to a lot of inefficiencies in advice businesses; advisers and paraplanners doing numerous things they simply don’t need to be doing.
• Stop doing things that you are not qualified to do; the whole investment management piece is one area. Introduce outsourcing, designed to increase margins and derisk the business. While the adviser tends to operate on 17% margin, investment businesses operate at 38%. Ever asked yourself why?
• Efficiencies in back office systems is one answer. Advisers not “double keying” client information, which could boost margins is one example. Sandringham employs a back-office system that uses the adviser’s Unipass permissions to upload all the client data direct from a provider’s back office system. This avoids all “double-keying” and replication that we see in our profession.
• Little things don’t make a difference, but aggregate them up across 160 advisers and look at the efficiencies they generate -it does become quite significant.
The important thing for us is to provide the business with a robust support mechanism that facilitates growth, and to deal with the struggles that all businesses encounter along their journey. Client-centric firms will attract new business, and with the opportunities to deliver higher turnover, better margin and improved profits. The prospects are out there. People want advice. Needs are even more complex. But people want a little bit more for their money. Advice is so transparent now, and clients are looking for first class service. If you can articulate what you do and justify fees, this is where the opportunity lies.
