Financial Advice Nirvana: Strategy

Matt Jeffery, Bradley Northrop

Part 1: Strategy

In many ways, financial advice has come a long way in the last 20 years, through increased standards and professionalism, greater transparency, and access to a broader range of services. However, the advice process is still largely inefficient, customer engagement is often poor, and firms have been slow to adapt towards the evolving market landscape. We firmly believe that the advice market is at the forefront of some cutting-edge change, which should create benefits for clients, advisers, and advice businesses.

In terms of running an advice business, it is well documented that barriers to entry are continuing to rise. The level of regulatory scrutiny remains in sharp focus, delivery costs are increasing, the service and engagement expected from customers is evolving and the recruitment of high-quality advisers becomes more and more challenging as firms look to capitalise on the current strong market opportunity.

We are starting to see an explosion of interest in the market, as players from across the industry look at ways of tackling the challenges and grasping the opportunities, delivering more innovative ‘advice’ capabilities and getting closer to the customer, and building a scalable and profitable advice model. This is ultimately leading to greater consolidation, an increased focus on vertical integration, and significant investment interest from private equity, wealth managers, banks, and platforms.

Given the changing face of the industry, advice firms need to be particularly clear in their intentions. At a strategic level, firms need to define who their target clients are, the nature of the proposition they want to take to market and the channels through which they should be delivered. Doing so may open firms up to a number of opportunities currently presenting themselves:

  • The advice gap represents a large and growing revenue opportunity
  • Inter-generational wealth transfer brings different client needs
  • Demand for hybrid advice provision (expedited by Covid-19)
  • Introduction of technology to automate commodity processes

This is the first in a short series of articles on how advice firms can position themselves for success.


Who are your clients?

The client should be the starting point for any business looking to define their future strategy. Firms must be clear on the market segment they are trying to tackle, and the client needs they are trying to serve. This is not as simple as drawing boundaries based purely on assets or demographics but requires a broader and richer view of the customer including their situation, behaviours, how they would like to be served, and also their hopes and desires.

Firms must then try to understand how to engage these customers and identify what is required to be positioned to support at the moments that matter, when the customer requires help with their financial planning.

What is the value proposition and how is it delivered?

The logical progression, having defined the target client base, is to define how your business will serve these clients and why your services are valuable to them. This is a complex exercise and is best displayed as a proposition blueprint.

The proposition blueprint will establish the service you are taking to market, it will identify how you are meeting the customer needs and the value the customer receives from the services. In designing a proposition blueprint it again puts the customer at the heart of your business and designs the process from the customer and not an operational or regulatory perspective.

Being able to define the core value proposition answers the critical client question,

“why should I choose your business to help serve my need?”

As a result, what does the overall business model look like?

Armed with a clarified view over the target clients and service definition, firms can look at how to operate and achieve their goals. The business model defines the overall support function for bringing together the client with the firm’s services. The delivery methods are of key importance and will play a big part in how any change is eventually implemented.

In building out the business model, firms should look to review what capabilities they have and what capabilities they will need in order to execute the proposition blueprint. These could be technology, people or process orientated and the firm will need to identify what aspects of the value chain it makes sense to outsource or retain in-house.

Particular attention will need to be paid where the target client base includes segments not previously served. Are new services also required to maximise this opportunity (for example, delivering whole of life protection solutions) or does a different delivery method need to be considered (for example, remote/hybrid advice provision)?

Corporate development should also be considered here – how can M&A be used to the advantage of the business and ultimately the client? Obtaining new capabilities via acquisition is the driving force behind vertical integration and gives the firm a greater scope. Strategic partnerships can open doors to complementary capabilities for which it is not palatable to bring in-house and leverages competitive advantage.

What’s coming next?

Today, we have looked at the considerable opportunity in the market and the different ways in which participants are looking to capitalise. We have set-out the approach firms should take when looking to identify opportunities to enter, grow or scale into this market and the steps required to establish the target customers and develop a proposition blueprint.

In our next piece, we will look more closely at the behavioural aspects of financial advice and how the adviser can create psychological safety for clients, on top of the core services described in the blueprint and business model.


Get in touch

If you wish to discuss any aspect of the series, then please contact us.

About the Authors

Matt Jeffery

Matt is a Manager in Alpha’s Insurance division in London and helps lead the Financial Advice proposition. Matt has over seven years' experience in the investment industry, having trained as a financial adviser before moving into consulting. His background gives him a unique position to help his clients and, as a result, he has built up strong expertise across the value chain. Recently, Matt has helped his clients in projects across operating model design, supplier selection, corporate strategy, M&A, outsourcing, and product and distribution strategy.

Bradley Northrop
Associate Director

Bradley leads Alpha's consulting capabilities to the Financial Advice market. Bradley is a qualified Financial Adviser and has experience in leading technology, business change and transformation projects both in industry and with a top tier consulting practice.