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From Sales to Advice to Planning: A Real-Life Journey
In the summer of 1982, at the age of 21, I found myself out of education and unemployed in a city where I knew few people. In a recession. These were the days of using a UB40 form in the UK to ‘sign on’ for the dole, and I needed to work.
It became apparent that selling was the main opportunity, as they would pretty much hire anyone with a pulse. After a brief flirtation with selling double glazing, it became clear that selling insurance was more honest.
So, after a whole week’s induction (“There is Birmingham, that is a Rate Book, come back when you have sold something”), I was let loose on an unsuspecting world.
After finding out all the things I was useless at (such as cold calling and selling to family and friends), I found I was reasonably good at being organised, and looking after some of the hundreds of ‘orphan’ clients that the 90%+ attrition of failed salesmen – pretty much all men – had created.
Being able to walk and talk at the same time saw my progression into management, and then into a training role.
In those days, the world of ‘commission only, direct sales’ was unregulated. It was a ‘buyer beware’ world, one in which consumers had no choice but to trust the adviser, and little recourse if that trust was misplaced.
Whilst most advisers were not unethical, many were less than well trained, inexperienced and massively conflicted – if you did not sell, you did not earn. Ongoing training, such as it was, focused on better sales techniques, and Frank Bettger and Zig Ziglar were the ‘go to’ gurus of the day.
Many of those that survived this rather brutal environment learned there had to be a better way of doing things, and slowly refined the sales model. This involved spending more time working within niche markets, – I worked with the armed forces, for example – and moving from one off, ‘fire and forget’ sales, to ongoing relationships and deeper understanding of the client’s needs.
In short, what we would today recognise as the Advice model. Still dependent of the sale of products as a business model, but a more stable and sustainable model.
By the time the first tranche of Financial Services regulation in the UK was introduced in 1988, many advisers had moved to what we would today call a ‘Multi Tie’ or even an ‘Independent’ model, often called ‘Brokers’.
As we look around the world, this is still a very common model, especially in the USA, EU, and India. Essentially, it works. And by ‘works’, I mean it’s more profitable than a pure ‘sales’ model.
In the UK, most pure sales models have gone, simply because they were massively loss making, as they require high levels of marketing, management and compliance spend. Some do continue, as the loss making ‘distribution’ arms of highly profitable fund companies, but I’m not sure how sustainable that will be.
The ‘advice models’ are much more profitable. In the UK, the average turnover per adviser is something around £170 000, around R3.5 million. The adviser will retain between 40% and 75% of this, depending on the exact model involved.
But quietly, starting to bubble away, a different business model was evolving. One that asked the question, ‘do we even have to sell a product?’
Dating from 1969 in the USA and 1985 in the UK, financial planning was starting to gain ground. I was aware of this model and knew plenty of financial planners, but had not grasped the way the model was actually different.
Eventually in 2006, I was persuaded to spend a week at a very intensive workshop, teaching already qualified people how to be financial planners – or at least how to start being financial planners.
The already qualified part was important. I was – and remain – a great believer in qualifications. I became the first Fellow of the Society of Financial Advisers (FSFA) in 1993, passed the CII associateship in 1995 (ACII) and then gained my first Chartered title. I even won the Insurance Mastermind title in 1997!
So, the week was about using knowledge that was – in theory – already in place.
I admit to some cynicism: What was I going to learn? But by Tuesday lunchtime, a light went off in my head. This practical, disciplined and holistic approach, looking at the complete picture, making reasoned and reasonable assumptions made complete and total sense to me. Why would you not do things this way?
And so much better for the client as well. For the very first time, I felt the process put the client, and not their money, at the heart of the relationship, and allowed clients to give proper, grown-up and informed consent to creating and implementing a plan to achieve their goals.
Products and funds were relegated back to their role as mere implementers of actions – along with calculators and excel spreadsheets.
By 2009 my wife and I – who had attended the same workshop – had sold our business consultancy and set up the financial planning business we still work in today. Nothing like being committed to a belief…
So that has been my journey from sales to advice and to financial planning. Although a personal one, it is a journey that many others of my generation – those of us that survived the initial shocks – have made.
What matters is what we learned on the way
Whilst we can get emotional about names and badges, it is not about whether one is ‘better’ or has more prestige than another. It’s all about a business process. And if I can simplify, the business models are as follows:
- Sales is a distribution model. Whether that is beer, cars or investment funds, you task people with selling X ’Units’ and pay them based on the units sold. Simple
- Advice is pretty much a consultative sales model. It’s often what you see in medical sales, for example, where the ‘rep’ has greater expertise, and will pick from a range of drugs they have available to provide the right ones to doctors, dentists and pharmacists. But reward is still on ‘stuff’ sold
I sometimes think about the difference between picking up meat for a braai in a supermarket, and buying from a good butcher. Supermarkets are all about distributing what they have. You, as the consumer, can expect that the stock is safe and fine and is as it’s described on the label. But if you visit a butcher, they will ask what you like, and cut your steaks as you like them while telling you about the nice bit of lamb they have just sourced.
In both cases, you will end up with the meat you need to have a good braai.
But if you are one of those people that could do with cutting down a bit, you are not going to have a conversation with either model that says: “Steak AGAIN Phil? Perhaps try a nice bit of salmon or king klip for a change? And really, salads are not just decoration – can we try one?”.
So perhaps a specialist who is paid by you purely to advise you, a specialist who has no need or interest in selling a product, and whose objective is to help you reach your goal of not dying of a stroke at an early age is better suited to your well-being.
And that’s what financial planning is about.
Yes, it’s a business model, but it’s a purposeful process of helping clients make the best of what they have, by guiding and advising them along the way.
Yes, products and funds may be required. But sometimes spending less, making the most of tax allowances, and simplifying their affairs can have greater impact than buying the top selling fund of the last 20 minutes.
And, yes, it’s profitable. It has to be. But post RDR we saw financial planners’ turnover per head rise to over £300 000 (R6 mil) per planner. Best is, often 90% of this is recurring, sustainable underlying income.
My last thought?
After 40 years of selling, managing, training, giving advice and management consultancy, financial planning is simply the most fun role I’ve ever had. A lot of that is because it’s the role where I can see the greatest outcomes.
And that’s pretty fulfilling.