Independent Finance Advisers (IFAs) describe professionals who do not represent an insurance company; rather, they give financial recommendations as independent practitioners. This report aims to profile these major finance advisory firms and their respective markets in the US and Australia.

 

In the United States, IFAs operate in the realm of public finance. The largest association of such advisory firms is the National Association of Independent Public Finance Advisors. The following companies are some of the largest and most active of these IFAs.

 

A.    Profile of major players

 

As one can easily notice, the financial services industry has undergone sweeping changes over the last few years. The current landscape constantly makes reference to the maturity and siloed nature of technology applications that reside within many financial services organizations. Furthermore, as financial institutions assimilate legacy systems through M&A, add new customers in new markets, and begin to offer a wider array of new products, such as brokerage and insurance services, they (in particular the larger players) are reevaluating how they manage customer relationships and taking an integrated look at customer value.

 

Small and medium sized organizations (SMBs) such as building societies, general insurance brokers, life and pensions brokers, fund managers, foreign banks with a UK presence, IFA  and so forth, which are traditionally known for excellent customer service and at times, niche loaning characteristics, are under increasing pressure to remain viable as large banks and insurance companies continue to make inroads into their markets. Furthermore, demanding compliance requirements and increasing competition from within their ranks are placing additional pressures on these organizations to remain viable. Their overarching goal is to maintain their appeal as the local market alternative to upper tier firms and in order to do this, they need to be proactive in how they manage their customer relationships and also how they can derive more accurate customer value. A logical solution for the two aforementioned issues comes in the form of Customer Relationship Management (CRM) systems, which may come as no surprise to many readers. In light of this, effective and efficient CRM solutions that are specifically created for and targeted at the SMB space, can help smaller financial organizations increase revenue while maintaining their forte of superior customer service.

 

 

Consumers in mature markets such as the UK, US and Western Europe are running out of steam. American and British spenders have weak balance sheets - low savings, high debts and fear of rising interest rates. Independent financial advice suggests that we are shopped out. But the Asian consumer has built up high savings and has little or no debt, while the credit card culture is in its infancy. They've been putting money away since the late 1990s Asian debt crisis, but they are going to want to spend it some time.

 

Technology will be a key issue in the race to improve profitability. Although the IFA industry has followed the main technological trends of increased speed and easier access to data, there is a general feeling that providers have failed to improve technology to make things easier for advisors, and instead are competing against each other to the detriment of the advisory industry.

 

However, if administration is improved, the income IFAs derive through sales will have a higher impact, and will enable them to achieve high levels of repeat business through improving their communications and information systems.

 

Another key issue affecting the long-term future of the business is the problem of an aging profession. There are not enough new advisors coming into the market, which seriously threatens the future of the industry. Because the average IFA is a lot nearer to 55 than 25, their perspectives tend to be narrower and their goals more short-term, making them less responsive to change and less keen to take advantage of new products such as wraps, which require a long-term view.

 

However, some fear that technology may eventually reduce the need for financial advice. On some insurance websites, for example, the entire term assurance application can now be completed online, removing the need for an advisor.

 

Nevertheless, the aid of an advisor is still essential. Technology is unlikely to replace or reduce the advisory business by any significant margin. The industry must therefore learn to view technology not as a threat but as an opportunity.  

 

A more competitive and complex landscape for financial services providers is forcing many organizations to reevaluate existing channel strategies. This is especially true of small and medium sized organizations looking to remain a viable alternative to their larger counterparts.

 

Strategic investments / upgrades in CRM systems can help smaller financial  organizations such as independent financial advisors, life and pension brokers, general insurance companies, building societies and similar firms improve revenue generation while reducing costs and maintaining superior customer service advantages.

 

Even though the internet is a significant and cost effective sales and service delivery channel, fund managers,  IFAs and other smaller players cannot afford to rely only on one channel over another because this would limit functionality and product options and hence, customer service. With customers using any combination of the channels available to them, it is essential that SMBs form a coherent multi-channel strategy. While offering a range of channels may be seen as a positive attribute, if they remain siloed and are not fully coordinated they can have a negative impact on customer experience and ultimately on the financial organization itself as well.

 

 

 

In Australia, the financial planning services are initially delineated by law by the granting of license to deal in securities or advise on investments. Licenses are issued under the stringent criteria by the Australian Securities and Investments Commission (ASIC), which has evolved these regulations vigorously over the years. Financial planning is now a highly regulated industry in Australia especially where financial advice to the public is involved. Practitioners who offer advice that could influence a client's decision to purchase a financial product must meet minimum training requirements and be licensed by the ASIC. The meaning of 'licensed' refers to Australian Financial Services License (AFSL) holders and representatives or authorized representatives of license holders. Broadly, most people embarking in financial planning will start as an authorized representative of a license holder.

 

The Australian Government established the financial services division of Invest Australia to position Australia as a global financial services centre in the Asian time zone.

Spicers senior financial adviser Jeff Matthews says one is the maturing of the Australian financial industry. As Australian firms seek new markets, it is natural for them to look across the ditch.  Queensland's MFS has made the biggest move in creating the Vestar chain. But other Aussies have been flashing the cash.

 

The Australian Securities and Investments Commission (ASIC) recently conducted a survey on superannuation switching advice given by Australian financial advisers. The results are disturbing. ASIC looked at 4,900 cases of advice given by advisers with a related party conflict (advisers that are not independent). They found that in a staggering 90% of cases, the adviser recommended a switch to their related fund.

SIS Market Intelligences - “Independent Finance Advisers (IFAs)”