The idea of differentiating your business from its competitors is not a new one. From the biggest multinationals to the smallest but successful one-man bands, the ability to communicate to your customer that you can offer something unique has always been one of the hallmarks of a good business.
In achieving this, brand development is crucial, but so too is knowing who your customers are and how to tilt your service to them.
While it may seem counter-profitable to limit the scope of your service by client type, to be seen to cater to a specific group could actually drive more business your way – because in the eyes of your clients, you value them above all others.
A good example of this is Saga, which specialises in services and products for the over-50s, a group that no doubt feels under-represented when it comes to consumer brands on the high street and in popular culture in general.
From insurance and lifestyle products through to cruise holidays, Saga makes over-50s feel special by excluding under-50s from the party. So much so, that in a Google search for over-50s, Saga’s website comes fourth.
Competitive spirit
In the financial advice sector, the imperative to offer something unique is about to become a great deal more important.
From 1 Jan, when advisers are required to charge an upfront fee, the industry will look a lot like other straight-forward transactional sectors.
Since the retail distribution review was five years in the making, some lines have already started to be redrawn, and only the most foolish business leaders have chosen to stand still in the hope their firm would find its place in the market.
Those of a more proactive ilk have strived to understand the longer-term ramifications of the RDR and tried to work out how they might benefit from them.
Lee Robertson, CEO of Investment Quorum, understands that in a financial services sector with greater transparency, competitiveness is sure to increase. If investors are more aware of the price they are paying for financial advice and wealth management, they will be more discerning when it comes to choosing who to use.
For this reason, he thinks it is vital to have a strong brand and an ethos that filters through the whole business. He uses ‘P9’ to sum up the boutique wealth management model his company is built around.
“Boutique is a business model. Boutiques do not compete on price but service, because price sensitive clients are not usually particularly loyal. We believe our service mix to be largely correct, and consistency is crucial. Our packaging must be of a very high standard – cards, brochures, digital output, client reports, client guides – all in our house style, with no exceptions,” Robertson says.
Although access to Robertson’s firm is not exclusive in terms of client type, he makes his service seem specialist by defining very clearly what it is about and what it can do.
He also deems regular and relevant communication with clients vital, and holds bi-monthly ‘Breakfast Club’ meetings, which clients are invited to attend to catch up with the investment team.
Value of feedback
On top of this, Investment Quorum issues ad-hoc topic reports, hosts bi-annual larger client seminars, sends out portfolio reports and provides online portfolio access. A weekly investment report from CIO Peter Lowman is also mailed out with e-newsletters that include video content.
“Volatility leads to unease, so when markets are poor, tell it like it is and tell it often. Ask for feedback and constantly test client relationships with group sessions,” he adds.
One firm that is more explicit about its speciality is London & Capital, a wealth manager founded in 1986 by Daniel Freedman and Richard Leigh. The company can be described as a “firm of niches”, according to investment director Tony McLoughlin.
The company has six specialist departments, including a sports and media arm specialising in wealth management for clients from those professions, and an immigration department that aims to appeal to wealthy individuals moving to the UK from abroad. But perhaps the department that stands out most of all, by virtue of its timeliness and opportunism, is the one dealing with investors liable to pay US tax.
Focus on FATCA
The main reason for this is the Foreign Account Tax Compliance Act (FATCA), which will gradually be implemented over the next few years.
Buried in the 2010 Hire Act, this piece of legislation has long-running ramifications for clients who are US citizens, or who have ever been a US citizen, even if they are now resident in another country.
The tentacles of the US Government can be far-reaching, and this is precisely why ignoring FATCA is a bad idea. But for many advisers, changing business practices purely to deal with a handful of expat American clients is not feasible, nor desirable.
London & Capital on the other hand, has a long tradition of working with precisely this type of client. So much so that five years ago it pre-empted the direction US legislation would take, established an office in Miami and registered with the Securities and Exchange Commission.
Now, McLoughlin says, around a third of London & Capital’s revenues come from its US-associated clients.
“Through various networks we have become known, in the investment community in the UK and Europe, as one of the few firms left that still welcomes US clients. What began as a slow trickle of enquiries became quite substantial and frequent through 2010 and beyond. We now get from half-a-dozen to a dozen enquiries every week from other investment professionals facing the problem of being able to meet the client’s requirements and constructing compliant investment portfolios.”
So how did they become known for such a specialism?
“We did thought leadership articles for trade press, and built our reputation up through word of mouth within the industry. We also did mailing campaigns to professional intermediaries, focusing on investment groups we knew were telling clients they did not want to have US citizen or tax-paying accounts.
“We also got involved with some of the industry groups and were invited by the Association of Private Client Investment Managers and Stockbrokers (Apcims) to talk at one of its events.
“Another successful move was to approach the alumni associations of the business schools in big US universities, and offer to bring specialist tax and legal advice and put on a presentation to explain the changes ahead.”
McLoughlin says businesses cannot afford to wait for clients to come to them, and if they have a speciality must find ways to shout about it.
But Apcims chief executive, Tim May, says he is yet to notice a significant trend in wealth management firms choosing to specialise down client lines. He predicts there could be an increase of “task-oriented” business on the advisory side of the industry, with investors advised on a one-off event such as inheritance tax planning, divorce or retirement. “When clients want help they know it is there to get, but there is not a continual relationship with that adviser,” he explains.
Relationship experts
Within the private client and wealth management sector, on the other hand, he continues to see client relationships as crucial.
This is something Martin Wheatley, managing director of the FSA, picked up on during his recent speech to Apcims’ members. At its annual conference he called for wealth managers to make sure “unique relationships” are maintained and “confidence in financial services rekindled” by putting client suitability at the centre of their business models.
If the top man at the FSA is saying it, perhaps this is the specialism so-called ‘bespoke’ firms need to focus on the most. No matter who their clients may be.
