We have just over a month to go until firms must be consumer duty compliant.
But one thing I keep hearing is: 'Carla, I feel like I’ve hit a brick wall with what to do next. How do we take all the intangible stuff we do, and evidence that it’s fair value?'
Most financial planning firms do not know where to start. And that is not because they do not deliver value. Most absolutely do. But it is because there is an awful lot of ‘stuff’ that planners do that is quite difficult to quantify when we are thinking about value assessments.
The most common one I am asked about is: 'How do we quantify peace of mind?'
And my answer is: easily.
One of the things you have to do first is really nail down what the Financial Conduct Authority means when it references value and fair value.
It tells us that value is the relationship between the amount paid by a client for the product, and the benefits they can reasonably expect to get from the product – in an adviser's case the product will largely be their service proposition.
They then go on to say that a product provides fair value where the amount paid for the product is reasonable relative to the benefits of the product.
Now in my opinion those definitions are about as helpful as a chocolate fireguard. They give very little steer in terms of ‘how’ you go about assessing fair value.
So, if you are an advisory firm, what is important is thinking about the benefit your services (or other products depending on what you do) provide to your clients, and turn every single benefit into something tangible.
Let’s take peace of mind as an example.
Most firms will provide peace of mind to their clients in one guise or another. They will offer peace of mind at different and varying stages of their clients' lives, and on a variety of different matters.
Peace of mind could be in relation to financial markets and volatility; it could be a simple phone call to say: 'Sit tight, don’t worry, remember you’re in this for the long haul.'
Peace of mind could be: 'Based on our research, analysis, and cash flow planning, you can retire today, and you’ll be more than financially secure for the rest of your life.'
It could be: 'Yes, you can afford to take £10,000 out to buy a new conservatory.'
Or it could be: 'We’ve got your expression of wish forms in place, you’ve sorted your wills, we’ve got your last power of attorney done, and the potential inheritance tax liability has now been successfully mitigated, so your family will have much less to worry about as you age and eventually pass away.'
