The Importance of Cost Consciousness in the Current Climate
The consensus among economic commentators is that we're currently enduring one of the worst recessions in living memory.
According to the Office for National Statistics (ONS), the UK economy suffered a record collapse in the second quarter of 2020, with gross domestic product plunging 19.8% between April and June. There's no sign of an imminent recovery either, with economists at the World Bank Group predicting a 7% contraction in activity in developed economies during 2020, which would represent the deepest recession since World War II. The International Monetary Fund (IMF) are also projecting global growth to be -4.4% throughout this year, unfortunately with growing divergence between the rich and the poor as economies recover in 2021.
With infection rates increasing across Britain and government support for businesses and employees drying up, people are really having to look at their bottom lines at the moment. Cutting costs is crucial for survival, and non-essential services are typically the first to be cut in such a situation.
For some people, professional financial advice may fall into this category. The more risk-averse among us would be forgiven for thinking that a £5,000 - £10,000 initial advice fee that was bearable a year or so ago cannot be justified in the current situation, particularly in light of the uncertainty around jobs and the general economy.
This, of course, propagates through to financial planners. With ongoing fees being crucial to the viability of any financial planning firm, getting clients on board still remains a priority. However, is it affordable to cut the cost of the initial fee to entice new clients to work with you? Can you still cover the administrative overheads or do you need to improve the efficiency and cost-effectiveness of your on-boarding process?
At PowerPlanner, we offer a "just use what you need" approach, which allows IFAs to have more control over costs and time scales when bringing on new clients. By outsourcing, you are only paying for a service as you're using it and have nothing to pay if there's no new business lined up, thus you have 100% cost efficiency. On the other hand, if, instead, you have staff to pay during quiet periods, or even a monthly-subscription-based solution, you're still potentially paying for resources you don't need. This makes it harder to give incentives for new customers to come on board, even though they may well need financial planning help more than ever!
We believe in empowering financial planners to apply their expertise where it matters most: delivering valuable advice to support their clients. Any other work done by a financial adviser is a candidate for outsourcing to ensure money is focused as much as possible on work that brings in revenue for the business.