Demonstrating an adviser’s worth and value

by Damian Davies on 30·05·2019

Your job is about to get a whole heap harder.

Since the start of 2018, ex-poste charges disclosure means you have to state explicitly the effect that your fees have on the client’s investment returns.

This could cause around half your clients to raise some uncomfortable questions with you.

Let me show you what I mean.

  • I love my accountant and I love my solicitor. 
  • I love my bookkeeper and I love my HR adviser.
  • I love my IT support company and I love my insurance broker. 

They are all wonderful people, but I hate having to pay their bills.

The reason is none of them do a really good job of telling me the value of what they do.

Nonetheless, I know I have to use these people, so I have picked businesses that are good at what they do and have people I enjoy working with. 

The trouble a lot of financial advisers are starting to face now is the perception of need.  Whilst you and I know the truth, in the public’s eye, advisers are not as necessary as most other professionals. 

Advisers can’t really rely on being nice people who are good at their job and have clients who like them but pay their fees grudgingly.

Clients are going to start to question the need of an adviser, particularly when the fees they pay are being thrown into such stark focus under MiFID II ex-poste disclosure. 

A recent survey by next wealth showed that less than 22% of clients could confidently say how much they pay their adviser. About 21% had ‘nothing more than a vague idea’ on fees and 7% were ‘just guessing’.

Ex-poste disclosure is going to change these figures to 100% know exactly what they are paying.

Added to this the fact that sadly so few people feel advisers are trustworthy[1], and the need to prove value couldn’t be more pressing.

You and I know the benefits of a really good financial planner, but clients don’t really understand it.  Without clear value, there is not the same need in a relationship with a financial adviser or planner as there is with a solicitor or accountant.

Advisers need to make clients love paying their bills. 

The trick is moving the client focus away from PRICE (which is fact) to VALUE (which is perception). 

This article will not give you all the answers, but you will be able to apply some of these thoughts to your business. 

Before we get going, there are two things that are worth addressing:

Firstly, heed the words of the greatest philosopher of our time, Chris Rock, who said don’t expect to take credit from clients for the things you are supposed to do[2]

Will a client be convinced your firm adds value when you say things like:

  • Our team is dedicated to helping you reach your goals
  • We put our clients first
  • We are fully qualified
  • We act with integrity in everything we do.

The client will read that and subconsciously say, ‘you’re supposed to do that!’.  Things like this do not add value.

Secondly, and an extension of that, is don’t confuse your service proposition with added value. 

The service proposition is what you produce or provide for the fee you charge.  It’s focussing on price rather than value.  Instead, focus on what the proposition can do to deliver value to the clients.

So, there are two types of value; one marketed by the company and the other accepted by the client.  To reinforce value, don’t focus so much on telling the customers what they pay for, but rather remind them of their intention behind the purchase.

The Next Wealth survey confirmed the top five reasons clients pay for financial advice are:

1. Better potential investment returns (36%)

This is tricky, as if you suggest your service will deliver this outcome, you have to know you will achieve that all the time and without fail, which is never going to happen.

If you have a client with this expectation, it is important to establish what it is they want the performance to be better than.  It could be better than cash or better than their existing investments.  Better may even just mean less volatile or more predictable.

In reality, the client is always going to be restrained by their risk profile and capacity for loss.  If they are being unrealistic, it will save you a lot of hassle and heartache to advise them they are being unrealistic as early as possible.

This type of expectation is likely to be reflected in a % based charging model, as the fee generated is linked to the value of the investments.  It is only natural for clients to link the two together.  As such, if ‘getting better potential investment returns’ is the basis of your value to clients, you should gladly charge based on your ability to deliver that.  Just be careful that you manage that expectation well.

2. Peace of mind (26%)

Peace of mind is going to mean different things to different people. 

Does it involve the client feeling you will take actions on their behalf before they even know action is needed?

Does it involve the client feeling you are saving them from themselves through your experience, knowledge and qualifications?

Does it involve the client feeling that your involvement will see them paying less tax?

Does it involve the client feeling you are recommending the ‘best’ products to them, and what does best even mean?

You can’t demonstrate value until you identify what peace of mind means.

3. To ensure financial goals are met (15%)

I was surprised that this was as low as it is.  After all, everything about suitability is linking a client’s goal to a means of achieving that goal.  You can’t have a suitable file if there are no client goals.

Secondly, cashflow forecasting has become so much more prevalent than it was 20 years ago. 

It is surprising, therefore, that only 15% of clients seek financial advice for this reason.

Nonetheless, for advisers it has to be the most effective means of delivering value as it can be measured by progress towards a goal and removes some of the awkward conversations that can happen in times of poor investment returns.

4. Help with the administration of financial affairs (13%)

Financial services is an impenetrable world to an outsider.  Enormous institutions with no easily discernible front door, acronyms and jargon littering every bit of contact, documentation filled with legalese all serves to alienate a client.

Clients looking to engage you for this reason present a real challenge in terms of proving your value.

You, however, represent a trusted guide, helping the client navigate their way through.  Your value is enormous, and proving it will include things like the amount of time spent dealing with insurers on the client’s behalf, time spent on CPD and exams, time spent reviewing affairs,  time spent administering documentation for clients, dealing with other professionals, like accountants and solicitors.

Time is the key, which is going to be difficult to reconcile against assets under management fees.

5. Access to markets (8%)

As either an IFA or a restricted adviser, you are involved in the intermediation between the client with an objective and the product that will help them achieve that objective.

The value in this is the not inconsiderable amount of work that you have done to research the wider market to look at product functionality.  Once you have a shortlist, your due diligence is then about looking at the companies behind the products to consider how they are managed.

This intelligence forms the basis of the value you provide to your clients who are looking to get your help with accessing the market.

I recently wrote about how PROD should be your best friend, and it is exactly these types of clients that will value the work you do under PROD.

The action you take in relation to creating a perception of value will differ depending on how you charge. 

  • If you charge hourly rates, what value are clients getting from every hour you spend on their work?
  • If you charge flat fees, what value will the client get for every pound they spend with you?
  • If you charge AUM, what value do the clients get proportionate to the amount they are investing?

This could be a great time to review how you charge to ensure your clients really understand the value of what you offer.


[1] FCA Financial Lives Survey, June 2018

[2] In a much swearer, funnier way – google it!