The first directory I can recall was the Yellow Pages. Originally a thick book, technology disrupted their business model and in 1996 Yell.com was launched. A couple of years later Google appeared taking disruption to a whole new level. Finally, in January 2019 the printed version of Yellow Pages was withdrawn.
Why the trip down memory lane? Well, I’ve been giving a lot of thought to the state of the adviser directory market.
Directories are important. They connect consumers to much needed professional advice. And (as part of a comprehensive marketing strategy) can be a useful source of new enquiries for advisers and planners.
The existing directories can be broken down into three main groups:
- Those run commercially; Unbiased, VouchedFor and AdviserBook
- Those run by regulatory bodies and consumer organisations; for example, the FCA, Money Advice Service etc
- Those offered by professional bodies; for example, the CII, PFS, CISI, SOLLA and so on
There’s no doubt that there’s growing disquiet amongst many in our profession about the state of the directory market:
- The FCA has been rightly criticised for the nonsensical decision to remove advisers from the existing Register before its replacement is ready
- Unbiased has increased fees and introduced the matching option and Response Rating, both of which are unpopular with the people with advisers/planners
- Other websites are pretending to be directories when they do nothing more than sell leads
- Many directories get little or no promotion so consumers who might otherwise find them useful have little chance of finding them
It’s a market ripe for disruption. It needs shaking up.
In our view, directories (or at least those which care about consumer outcomes) should have two key aims:
- Ensuring that consumers find the right adviser/planner
- Ensuring that consumers receive high-quality advice
Naturally, the pricing and proposition also have to be right for the adviser/planner community. After all, a directory which doesn’t engage with the people who pays its bills won’t have much of a future.
With those aims in mind, let’s consider three fundamental questions.
1. What does the ideal directory look like?
Ask 10 different people this question and you’ll probably get 10 different answers.
Here’s our list:
- The consumer must be put in charge by letting them search based on the criteria important to them. Then, the consumer, and only the consumer, should decide which adviser/planner to contact. It’s a model championed by Ray Adams when he launched AdviserBook and for us, it’s the only way to go.
- The search criteria should be as wide as possible. If a consumer wants to find a Chartered, Independent, Financial Planner (as recommended by Paul Lewis) the directory should be able to handle that. Clearly, for this to be possible the directory needs to collect that data and verify it, so consumers can be confident it’s accurate.
- The directory should be as comprehensive as possible. That means including both independent and restricted advisers. There are some obvious difficulties here, for example, not every firm will want to be included in a commercial directory, while the trade bodies will naturally promote their members. Again, AdviserBook is probably the closest to doing this, while the new FCA directory should, in theory, be able to accomplish this aim.
- Sadly, we know that just because a firm holds impressive designations and accreditations it doesn’t always lead to high-quality advice. Therefore, we believe it’s important that consumers have some indication of the quality of the advice they will receive. There’s no perfect way of doing this. Currently, the only directory which addresses this issue is VouchedFor, with over 125,000 verified reviews.
2. Who would build a new directory?
There are two options: regulator/consumer groups or a commercial model.
Either way, they must have the financial clout to build and promote the directory. Building it with comprehensive data and search functionality is hard enough. But if it isn’t going to get promoted to advisers, planners and consumers alike, there’s no point building it in the first place.
Of course, it doesn’t have to be a new entrant to the market. One of the existing players could take the lead by innovating to solve the current issues.
3. Who pays?
Any new entry to the market will need deep pockets to build and promote the directory. To do that, it needs revenue.
There are two options; consumers pay or advisers/planners do. I might be wrong, but even though there’s a huge benefit in financial planning, I can’t see consumers being happy to pay.
That leaves advisers and planners. Now it starts to get really complicated:
- Is it a flat fee model?
- Is it a flat fee plus an additional cost per enquiry?
- Is it a revenue share?
There’s no perfect pricing model, what suits one firm, another won’t like. Although there is some consensus with VouchedFor and Unbiased’s current pricing broadly similar. We need a sweet spot though where the directory is financially viable, and the enquiries created represent an acceptable return on investment.
There’s no doubt that the current directory market has issues. That said, there’s a lot to like and some do an excellent job in connecting consumers with advisers and planners.
Nevertheless, it’s a market perfect for disruption.
We don’t believe that a single directory can achieve everything on our wish list. We need to be more pragmatic. The new FCA Register is probably the most sensible place for a comprehensive database of all regulated advisers. Although I’d like to see it split into two, so the different needs of our profession and consumers can be met.
Evidence of quality is an obvious hook on which a disruptor could hang their hat. I don’t see the FCA ever adding any qualitative measures to their Register so that’s the obvious place for a disruptor to start.
There’s already evidence of this in the US with the Zoe Financial model (thanks, to Alan Smith for tipping me off about them).
Here in the UK, VouchedFor provides qualitative information to consumers with thousands of verified reviews. However, their filters are currently rather weak. For example, it’s not possible to narrow the search down to Chartered and Independent planners. We understand that improving their filters is something VouchedFor is looking at.
There’s also space for specialist directories to promote specific types of advisers/planners. However, their inability to scale will curtail their revenue, which means they need to find innovative ways to promote themselves and connect with consumers.
So, will a disruptor enter the directory space? Will we see a Netflix or Uber inspired revolution? Frankly, we don’t know. But, if we do and their model addresses the issues we’ve highlighted then we’d welcome it.