Cold shouldered

There’s something wrong with my left shoulder at the moment, so I’ve had to embark upon one of my very rare engagements with the medical profession.

I had thought to write one of those blow-by-blow accounts of what a useless, energy-sapping, time-wasting fiasco the experience has been so far, but on reflection I’ve come to the conclusion that a) writing it all down would take hours and just make me feel furious and miserable, and b) reading it all would just make you feel very bored.

While I was at it, I could have added a few similar paragraphs around the experience of trying a new workshop to service and MoT my old car. Again I won’t try my temper or your patience with a blow-by-blow, although I’ve actually got plenty of time to do so since my service manager has now disappeared on a fortnight’s holiday and no-one else is briefed on what to say to me in his absence.

But even without lapsing into self-indulgent and overly detailed ranting, I can still make the point I want to make – which is, of course, that it’s not just financial services that are rubbish. Everything is rubbish, and particularly everything which involves co-ordination more than two organisations, teams or departments. (The medical experience is mainly rubbish because it involves co-ordination between my GP, the health insurance company, the consultant and the MRI scan people. The old car experience only involves my service manager, the two “halves” of the workshop, mechanical and bodywork, and the spares department of Aston Martin, but that’s more than enough.)

Years ago, I saw an unexpectedly brilliant conference presentation from the then-COO of Pearl Assurance (that tells you how many years ago). He had been investigating a mysterious phenomenon to do with the firm’s back-office error rates. Objectively, the error rates were terrible. But when you researched back office staff and asked them how many mistakes they thought they made, the answer was a tiny fraction of the real figure. How so, the COO wondered. Were the staff just lying? Or fooling themselves?

On close examination, he found the answer. The huge majority of the errors arose in one particular situation: at the point where one person was passing a job on to another person. Time after time transmission errors would occur, the passer failing to tell the passee something essential about what had to be done. As a result, the passee would screw up and the error would occur. But, more often than not, neither passer nor passee had any awareness that an error had occurred. Both felt quite sure that they’d done exactly what they were supposed to do.

The COO of Pearl Assurance told us that having once identified this problem, his company was able to achieve astonishing improvements in its error rates simply by concentrating its training efforts on how to achieve an effective handover process. (I have to say that these improvements clearly weren’t enough to save the company, which was sold and closed to new business not long afterwards, but still.)

Anyway, if the COO of Pearl Assurance is still out there somewhere and still has his presentation slides, I wish he’d show them to the Kentish Town Health Centre, Wellington Hospital and North One Aston Martin. At the moment, their error rates make the bad old days of Pearl Assurance look like paradise.

The trouble with “getting out of the office”

When I have long and/or difficult things to write, I like to get out of the office. In fact, ideally, I like to get out of the country, heading down to my second home in the middle of the French countryside.

While I’m there I’m extremely productive. As a result of the combination of guilt and relaxation, I do masses of stuff – and, on the whole, I’m pleased with it. I think my writing from France tends to have an accessible, conversational quality which makes it quite engaging to read.

The interesting thing, though, is that when I come to think about it I realise that on the whole, it goes down very badly indeed with clients. Usually, if truth be told, the week after I come back from a French writing jaunt is spend mostly rewriting the stuff I did while I was there. And when I say rewriting, I mean start-again time, not just a few small tweaks.

Why is this? As far as I can see, there are only two possible explanations. One is that when I go there, my judgement goes haywire and what I do isn’t half as good as I think it is. The other is that the clients in question are stuffed shirts who don’t want accessible and engaging stuff.

Given that a few of them read this, it’s probably just as well that I genuinely don’t know which.

Adviser Charging 2: The Clients Bite Back

In the run-up to RDR, intermediaries are finally starting to get their heads around the Adviser Charging thing. The received wisdom says that this is mainly about moving from a front-end sales emphasis to an ongoing service emphasis, and reflecting this with a parallel emphasis-shift from front-end to annual charge (either a flat rate or a percentage of the portfolio value).

The thing is, I have a nasty feeling the received wisdom may be wrong – or, if right, then only right for a couple of years.

To make my point, who shall I choose as an example of a Typical IFA Client? Ah yes, I know, me. Around three years ago I moved to a fee-based IFA who signed me up on just this kind of basis. In the first year of our relationship, when he was kept extremely busy shifting things around and moving my various pensions into a SIPP and so forth, that service fee seemed pretty good value. But in the subsequent two years, it’s seemed like very bad value indeed. Basically, the sum total of what he has done for his several-thousand pounds this year is….nothing.

No criticism, or not much, and no disrespect. I don’t suppose there’s very much that has needed doing. It hasn’t been a very special year – no big lumps of new money to invest, no need to realise any cash, no compelling reason to move any money from one place to another. In one or two respects he could probably have tried a bit harder. (Did I get any communication about using my ISA allowance, I wonder? If so, I don’t think it was any more than a standard all-client letter.) But equally, I’m pleased and relieved that he hasn’t embarked on a frantic programme of fee-justification involving lots of unnecessary churn and hours of pointless discussion about scary tax-avoidance dodges.

No big surprise that I shall be speaking to him shortly to suggest that much as I’m keen to continue to maintain our relationship, I’m thinking it would probably make more sense to pay for his time when I need it rather than pay an annual fee whether I need it or not.

I suppose this will be a little disappointing from his point of view, but I think the conversation will have a wider significance.

Behind that received wisdom about how adviser charging is going to work, I think there’s an implicit assumption that provided IFAs do indeed change their ways and provide a much higher level of ongoing service, the amount of revenue that can reasonably be generated from adviser charges will be at least as much – if not more – than can be generated from initial and trail commission.

Increasingly, I just don’t think that’s true. Most of us, in most years, don’t really need a whole lot of ongoing advice and service. Yes, there are clearly exceptional years, almost always life-event-related, when the need for advice peaks sharply. But in between, there can often be period of several years in which there is little or nothing for our IFAs to do.

I know from many years of my own experience in marketing services that when the workload is peaky and troughy, friction invariably results when the remuneration is on a retainer basis. Someone’s always feeling pissed off, or more accurately ripped off – and the argument that it’ll all come out in the wash over the long term, say a decade or so, doesn’t help very much. Retainers, or other forms of fixed fee, only work when the workload is reasonably consistent. When it isn’t, the only option is to move to project fees which are matched to the workload much more closely.

I think that IFAs are so keen to think of adviser charges as a new name, and a new format, for something which will actually work very much like trail commission that they’re failing to recognise and understand this crucial difference.

If I’m right – and if my own experience is typical – then in a couple of years they’ll find a distressingly large number of their clients helping them to do so.

Money Advice Service infuriates IFAs – and amazingly, they’re right

There are two interesting things about the new TV commercial for the Money Advice Service, which launched this week. You can see it here: http://citywire.co.uk/new-model-adviser/fsa-now-offering-independent-unbiased-and-free-advice/a498999

The first is the name. When it was invented, by Otto Thoresen in his report a few years ago, it was introduced to us under the working title Money Guidance. Then, in last year’s pilot, it was Moneymadeclear. Now it’s Money Advice.

Strictly speaking, the service is provided by something called CFEB, the Consumer Finance Education Body. But CFEB is in fact a recent spin-off of the FSA’s Financial Capability division, so it has the FSA’s fingerprints all over it. And the funny thing is that for over 20 years now it has been the FSA itself which has insisted with Jesuitical fanaticism that the word “advice” can only ever be used to define a very precise concept requiring a great deal of fact-finding about people’s circumstances and then the provision of recommendations which are fully tailored to their individual needs.

All of which Money Advice doesn’t do. The service has none of the characteristics which the FSA insists must constitute “advice.”

It’s true that this semantic issue will mean little or nothing to most consumers, who’ve never understood what the FSA means by “advice” anyway. But still, to hear the new service misuse the word so blatantly is genuinely shocking. Like hearing Germaine Greer start referring to women as “chicks”, or Trevor Phillips start calling ethnic minorities….well, you get the idea.

As you can also see via the weblink above, this “advice” issue has resulted in an outburst of exceptionally rabid outpourings from IFAs who are, almost literally, berserk with rage. It would be tempting to respond with the immortal words of Michael Winner (“Calm down dear, it’s only a commercial”), were it not for the second interesting point….

…which is the appearance of the protagonist in the commercial. The commercial is animated, so getting a sense of the chap isn’t completely straightforward, but as far as you can tell he is a middle-aged, middle class white male: and in pretty much all these respects, that makes him not the kind of person I thought Money Advice was supposed to be targeting.

As I’ve understood it, the whole thing about Money Advice is that it’s supposed to target the Other Lot – those who are not middle-aged, not middle class, not white and not male – leaving blokes like our protagonist to the tender mercies of the ravening IFAs. The almost-impossible trick that I thought Money Advice was in existence to try to pull off was to talk to young, poor people about long-term financial planning, and, by encouraging them to do some, to reduce the eventual burden that would fall on the State when young poor people become old poor people.

Showing an image of the prototypical target user of a financial service is always a dangerous and limiting thing to do in advertising, even when the image is able to project a precise sense of who that target user is. But in this case, the image seems worse than dangerous and limiting: it seems completely wrong and counter-productive, to the extent that when they see the advertising, the people who are in fact the prototypical target users won’t for a moment imagine that it’s intended primarily for them.

The lurking bear-trap in the whole Money Advice concept has always been that it’ll finish up spending a ton of money giving advice on the wrong subjects to the wrong people (especially the latter – the idea is not and has never been to offer free chats, coffee and biscuits to retired pensioners with large amounts of savings and too much time on their hands). The way the protagonist is presented in the commercial seems to me to give the whole project a big shove towards that bear trap.

Much as it grieves me to say so, I think IFAs are actually right to be pretty grumpy about this. The rest of us will have to settle for being mystified – except for a few cynics and sceptics, who may wonder whether, by deliberately recruiting the wrong user profile, those in charge are building a pretext for canning the whole thing in a year or two.

Remember, I’m not a Womble. Never was, really

To call it an avalanche would be an exaggeration, but in the last few days I’ve received a small land-slip of emails congratulating me on my forthcoming appearance at Glasto next weekend.

There’s a reason for this. There has been media coverage (rather negative coverage, in truth) about the fact that the Wombles are booked to appear. And a troublingly large number of my friends and acquaintances know that I did indeed play some of the Wombles music a million years ago. As two plus two = four, surely Wombles return plus ex-Womble means Lucian must be doing Glasto, right?

Completely wrong. It’s true that a millions years ago, I did spend a few months playing the Wombles music (cringing with embarrassment, grimly hiding the humiliating truth from my closest family and friends, determined to keep all reference a million miles from my CV, totally failing to understand that this would in fact turn out to be the only remotely interesting thing that I would do in my life). But sadly, from there, the story is all downhill. I wasn’t a Womble, I was a bass guitarist (you can’t play anything, not even Underground Overground Wombling Free, with a furry suit covering your whole body and more importantly both hands). I was probably one of at least a dozen bass guitarists who played some of the music during that period. And if the Wombles do indeed play Glasto, it’ll be done in the same way that it was all those years ago, with some actors and dancers dressed up as the Wombles onstage, and either a bunch of backing tracks or a bunch of musicians off stage providing the music.

I’m touched, I must admit, by the fact that quite a few people I know have read the story about the forthcoming appearance and jumped immediately to the not-unamusing idea that Lucian is playing Glasto.

(Little do they know that in fact, even longer ago than those distant Wombling days, I did in fact play Glasto, back in 1972 when it was a crappy and disorganised mudbath and the only band with a record deal who were willing to appear, unpaid, was Hawkwind.)

But today, all of this is unimaginably long ago. And with the greatest respect to my emailing friends, the idea that a 50-something financial brand and marketing consultant will spend next week prancing around under the Pyramid bashing out the bass part to “Remember You’re A Womble,” well, it’s not really the most plausible suggestion you’ve ever heard, is it?

At last, I’ve seen the view from the other side of the table

Absolutely brilliant day yesterday. I’ve been working with a new start-up business, and recently I’ve had to help organise a pitch for a brand development agency for them. Yesterday was the big day – so, for the first time in my career, I had the opportunity to enjoy the pitch experience from the client’s side of the table. And not once, not twice, but three times in a day.

What did I learn? Quite a lot, some of which I’d better not mention because the clients won’t be announcing the outcome till next week (and indeed a final decision hasn’t been made yet, although I’m pretty sure I know which way the wind is blowing).

Anyway, here are a few general and slightly vaguely-expressed points.

1. Our appetite for irrelevance is very small. We want as much as possible to be – or to seem to be – relevant to us. The most brilliant case study in the world isn’t worth bothering with unless it is obviously relevant. Non-specific creds should go in the document.

2. Our appetite for dull presentations is very small. This is a similar point to the last one, but not the same. Even if what’s being said is actually about us, if it’s dull and obvious then we start shifting about in our chairs and pretty quickly wondering if we could get away with blackberrying under the table.

3. We really respond to people who are obviously up for it. There are different ways of being obviously up for it, and fake displays of gushing enthusiasm aren’t among them. But real enthusiasm, conviction and energy count for a lot.

4. Probably the biggest point: actually, there isn’t really a dichotomy between buying the people, and buying the work. This was a new and important lesson for me, and I think it might deserve a bit of explanation.

When I lost pitches in my agency days, I guess that probably the commonest reason given was that the clients “were just blown away by an idea from one of the others.” I was always puzzled by this. You’re entering into a working relationship with a bunch of people who, hopefully, will be critically important to your business for the next few years, and you’re making the decision on the basis that they’ve come up with a clever headline for a trade press ad? A cliche involving the words “horse” and “cart” would come immediately to mind (along with an expression involving the words “bunch” and “arseholes”).

But the new point that I appreciate after yesterday is this: that actually, you will almost certainly feel warmest towards the people (or person) who show you that idea that blows you away. Since everything they say turns out to be leading towards something that you love, you also decide that you love everything they say. When the big idea is revealed, you feel a surge of goodwill and enthusiasm not just for the idea, but also for the fine, perceptive and intelligent people whose thinking led them to it. We saw one idea that we really liked yesterday, and – not by coincidence in my view – immediately decided that we loved the person who had come up with it. If for whatever reason, post-appointment, that idea fell over, we’d feel massively confident that that person could come up with something else as good or better. Another team showed us ideas we didn’t like: because we didn’t like the ideas, we didn’t think much of the people and thought they’d struggle to come up with anything much else.

I guess this connection doesn’t invariably exist. Sometimes, someone you’ve written off as a complete pillock comes up with something you love, and sometimes someone you think the world of has a bad day. On these occasions, you may decide that there are more important considerations in your decision-making than the idea that blew you away. But I suspect that, say, eight times out of ten, clients decide that the agency people who came up with their favourite idea are in fact also their favourite agency people – and of course then the decision really is pretty easy.

Anyway, those are the four lessons I wanted to share with you today. Oh yes, and one small final point: when the senior client’s school age daughter comes along to the pitches on work experience, be very nice to her and give her a book. All the other agencies will – you’ll look like cheapskates if you don’t.

1st June 2011: the date an era ended

Independent Financial Advisers were invented by the Financial Services Act of 1986, and arrived on the scene two years later, in 1988, when the Act was implemented.

As chance would have it, my first specialist financial agency, DMB&B Financial, arrived on the scene in the same year. As a result, I’ve spent most of the 23 years since worrying about how to market to, and communicate with, the IFA market – 22 as an agency creative director and chairman, the last one as a consultant.

But now – as of yesterday, in fact – I think we can confidently announce that this IFA-tastic era is over. IFAs will still matter, of course. But they are rapidly mattering less and less. Yesterday, I received an enquiry from a financial product provider which has focused on nothing but the IFA market since 1988. Now, they’re looking for help in developing a new direct-to-consumer proposition which will bypass the IFA market, and very likely prove more than a little irritating to the IFAs. They don’t care. They’re doing it anyway. And if even this company – I won’t name them – is now prioritising its D2C strategy over its IFA relationships, I’m happy to say that the IFA era is over.

Actually, I’m more than happy. I’m absolutely bloody delighted. As you’ve heard me say before, I am now seriously regretting the proportion of the best years of my working life that I spent concentrating on these bloody awful people. There was (indeed is) a huge lie at the heart of the IFA industry: for the huge majority of advisers, it was never about independent financial advice – it was about commission-driven selling.

Most of these people would flog anything to anyone for 5 – 7% upfront and 50 to 100 basis points annually thereafter. In the early 90s, a chap who looked like the soberest bank manager imaginable used to come round and see me with a briefcase bulging with brochures which he would spread around my desk like a conman punting fake watches: if I didn’t fancy an EIS or a VCT, how about an offshore bond? As our relationship entered its final phase he became hysterically excited about the fact that I had picked up a chunk of cash from the sale of my agency and almost literally camped out in the doorway to my office trying to persuade me to dump the proceeds into a wonderful cash-based investment that offered so much more than any boring old deposit account – yes, you guessed it, the famous AIG Enhanced Fund that caused all the trouble when it crashed and which is still the subject of various class actions by a posse of enraged celebs.

This had absolutely nothing whatever to do with financial advice, and absolutely everything to do with commission. In fact, in the heyday of Prudential’s Prudence with-profit bond, which I think paid 6 or maybe even 7% upfront to advisers, sales through IFAs were so immense that someone described the whole IFA industry as a mechanism set up in order to transfer billions of pounds a year from the pockets of Prudence Bond investors to the pockets of IFAs.

Amidst this 21-year orgy of rape and pillage there were of course IFAs who were actually in the business of giving independent financial advice, but there weren’t many – certainly nothing like enough to look back over that era with much enthusiasm.

Anyway, what’s now happened over the last couple of years is that the product providers have more or less given up on them. Certainly almost without exception they’ve given up on the idea that they can depend entirely on them for their distribution: one by one, the IFA-channel loyalists are launching initiatives using other channels, mostly D2C.

Why is this? Well, you could write a short book in answer to that question, but I think if you had to answer it in one bullet point you’d say that:
– post RDR (i.e. post December 2012) product providers won’t be able to use commission as a way of controlling their business flows through IFAs, and dealing with IFAs without commission is like dealing with an aircraft without a joystick or a ship without a rudder.

When you add to that fact a second bullet point, that:
– post RDR everyone expects the number of IFAs to fall, and, as a result, the volume of sales through that channel,

you can see why provider feel obliged to look elsewhere.

This is not a hugely elevated or admirable rationale. In fact, there’s something rather disagreeable about providers losing faith in the financial advice industry just when it may be on the brink for the first time of actually doing what it says on its tin.

But still, quite frankly, at every level, I’m absolutely thrilled to be spending a greater and greater percentage of my time on projects aiming to engage directly with consumers, and a smaller and smaller proportion on projects in which providers and advisers gang up to part them from their cash by fair means or foul.

You may say that I’m so keen to call the end of the IFA era, I’m jumping the gun. Maybe. As we all know, IFAs have proved amazingly resilient over many years in the face of many initiatives – mostly regulatory ones – intended to curb some of their nastier habits.

But this time, it’s not just the FSA – it’s the providers too. Of course few will turn their backs on the IFA channel altogether. But it’s not glad confident morning any more. Or even agreeably profitable afternoon.