Market developments
Having analysed the paraplanning market before setting up Plan Works, how does he see it developing?
“There is no doubt in my mind that there will be a growing need for paraplanners whether outsourced or in-house. To give you an indication of growth, there are three firms in my local area all looking for paraplanners. Demand is there but supply isn’t.”
However, just how much and fast the market grows will depend on how adviser firms view the paraplanner role, he adds. “Some smaller firms might think that they can do all their paraplanning work. It will depend on whether the adviser firm recognises that what the client values is the time the adviser is sitting in front of them, not what goes on in the background, and they can see the paraplanner bringing something of value to the business.”
“The other factor is whether they want to scale the business. Those who want to grow their business may want to have a paraplanner to increase their efficiencies and allow the advisers to concentrate on bringing in new prospects and building relationships with clients.”
Typically advisers are looking to Plan Works to provide full paraplanning, Fryer says. “They will provide me with the Factfind and the adviser’s initial idea of what they want to deliver to the client. We undertake the research and deliver feedback on those initial ideas. Then we agree a course of action and compose a compliant report together with all the relevant documentation.”
Where Plan Works tries to stand out from other firms, Fryer says, is in constantly focusing upon improving efficiencies. “I’m always questioning whether there is a better way of doing things. A client might say we’re thinking of doing xyz and I’ll come back and say, have you considered abc?”
Charging structure
While offering the first report free of charge may be unusual, in fact it is an effective way for the client and Plan Works to see if they are a good commercial fit, Fryer says. He limits the type of work he’ll take on within that first report, to ensure the workload is reasonable. “It enables the client to identify how we work, for us to identify how they work and at the end I produce a quote of what it would have cost to produce that piece of work. Providing both parties want to go forward from there we will add them to our client list.”
Currently, most work comes in on an ad hoc basis. On receiving the request, Fryer will call the adviser, establish the nature of the piece of work and then aim to have a quote with the firm within an hour, detailing the cost and a timescale to deliver the work.
However, Fryer says he is developing a retainer pricing structure, which will give adviser firms priority access to Plan Works’ services rather than take potluck on capacity under an ad hoc system.
“I’ve seen this work very well for other outsourced financial planning services. It gives the adviser firm that feeling of confidence that they know they have someone to do the work for them and for our business it provides regular cashflow and a bank of good quality clients with which we want to work,” he says.
Building the business
Having started his own business and seen it grow, are there any tips he would give to paraplanners thinking of going down the same route?
“The first piece of advice I would give is value what you are doing. It’s very tempting to begin with to underprice yourself in order to secure the business. The problem with that is because you aren’t highly valuing what you do, the client won’t either.
“Secondly, if you are going to launch your own outsourced paraplanning business, it’s not just about doing the work. You have to have an interest in what it takes to grow the business. For example, learning what SEO is. When I first started Plan Works, SEO was just three letters that meant nothing to me.
“Also, remember that there’s doing the day-to-day work and then there’s running the business. These are two separate elements that to start with will take up a lot, if not all of your time.”
So is it worth the effort? “Not having the security of a wage at the end of the month can be hard but the element of fear that comes with owning your own business really drives you. It’s long hours, there are those fears and the doubts about what you’re doing but then you start to turn a profit and it all fits into place.
“Is it worth it? Yes. I’m glad I set up Plan Works. It’s by far the best thing I’ve ever done.”
Drawdown calculator
In the course of his work, Fryer identified a need for a more accurate drawdown calculator and so developed one using Excel. He explains:
“I was working on a drawdown calculation for a client and spotted that the cashflow modelling software we were using was making assumptions based on linear positive returns; it wasn’t taking into consideration a market fall. As we all know, markets are unpredictable and, of course, the impact of a fall at the start of a drawdown period can have a massively different impact than one that occurs later on in retirement.
“The first calculator I made therefore factored in a market fall. We’ve since updated that version to include random growth figures within a specified range, so it’s a lot more like analysis based on Monte Carlo modelling. By using your maximum uplift and maximum drawdown numbers from your model portfolios you can get a more realistic idea of whether a client’s funds will last.”
The calculator is available to adviser firms and paraplanners for a small charge. Readers of Professional Paraplanner can obtain a discount lowering the price to £30.00. Just mention the magazine when ordering.
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