Four good things (and three bad) about my first year as an IFA

A year ago I wrote about my experiences of setting up a new IFA business - Prime Time Financial - having previously joined the financial services world from a career in IT. Well, it's been a year of hits and misses?

HIT: Survival: Since many new businesses founder in their first year, it's good to still be here, and to have made a small profit in the first year. Broadly speaking the type of business has worked out as planned, with a focus on clients in the ‘second half of life'.

HIT: Business structure: I operate as Prime Time Financial, which is a trading style of directly authorised firm Keystone Financial. This has worked out well, satisfying my objective of being able to work largely in my own way, but with the necessary compliance and other support available.

One strange thing in this context has been the FSA's desire for all advisers in a firm to operate in the same way. That might make sense in a local office where a client could deal with different IFAs over time, but when advisers operate largely independently and are spread around the country there seems little benefit to clients in trying to do things the same way.

Still, we managed to define some standard processes and pricing structures, so everyone is happy.

HIT (and MISS): Marketing: I knew, of course, that the early months (and years) would be about marketing in order to attract new clients, since I had no client bank to fall back on.

Early on I defined my target client and how I would attempt to attract them, and the marketing machine is now in full swing with a monthly email newsletter, a six-monthly printed newsletter to a wider audience, regular website updates, Google Adwords, listings in directories such as Unbiased.co.uk, and so on. I have also run four seminars during the year, two with a retirement planning focus and two for accountants.

But... the results of all that have not been as good as I would have liked. Apart from a small number of referrals from existing clients and friends, only web searches of various sorts have resulted in acquiring new clients.

I have been surprised (and disappointed) by the number of potential clients I meet with who seem keen and who have a need for advice, but who end up not responding.

HIT: Professional development: This has continued apace (no choice there!). With two Diploma exams passed in the year, that leaves just one to go before the end of 2012, plus a little gap-filling. The new RO exams would have resulted in a lot less work than the CF and JO route which I have taken, though, so how anyone can claim a "no regrets" policy beats me.

It's clear that even if the goalposts haven't moved, at least the route to the goal mouth has been changed. But overall I recognise that the number of exams I have studied for has been an important opportunity for a lot of good learning.

Other areas of professional development have resulted from client requirements, and have included some in-depth learning about structured products and investment trusts, as well as consideration of the active/passive debate. I'm also looking forward to a Kinder life planning course shortly, since this matches my objectives for considering clients' wider life objectives in the context of financial planning.

MISS: RDR-related charging changes: I am a supporter of the RDR's objectives, both in terms of increased qualifications and in the removal of the commission option. But the likely impact of the changes, mostly negative, seems to increase as time goes on, as does the complication of applying them.

From the beginning, Prime Time Financial has been RDR-ready in its charging structure, with up-front advice fees based on a project fee or an investment amount, and ongoing fees payable by monthly retainer or fund-based from a product.

Well at least I thought we were ready, because it now sounds like it will be even more difficult than expected for clients to pay an agreed annual fee out of a product.

And then there's the ludicrously-complicated issue with VAT - what does it apply to and what not? ... and how do we explain that to clients?! All of that is on top of the basic challenge of getting a client to pay more directly for advice.

Anyone who disagrees that it is more difficult should just see how many existing clients know what the advice has been costing them - commission disclosure doesn't equate to client understanding!

MISS: Lack of a Long-Stop: This is an issue which has been growing in my thinking over the year. The fact that, apparently, it is possible to be required to respond to a client complaint many years later, even in retirement, is fundamentally unjust. In the same way that we explain risk and return to clients, there is risk and return in adviser businesses, and the risk of being called on in this way requires a commensurate increase in return - opportunities for sensible profits - which seems increasingly difficult.

I am not a conspiracy theorist, but as a newcomer to financial services familiar with running other businesses, I have to resist the temptation to think that forces are at work to make our business model non-viable.

Peter Lawrence is Principal of Prime Time Financial

Read Peter Lawrence's previous blogs (From IT to IFA: Is this man mad?) below:

• Blog 1: Launch (and first impressions)
• Blog 2: Should I join a network?
• Blog 3: Exams
• Blog 4: Clients
• Blog 5: Improving my skill level
• Blog 6: Professional Connections