How to evidence value is a key focus for many advice firms right now.
The FCA’s ongoing advice letter in February to the UK’s top 20 firms sparked headlines and threw some firms into the spotlight.
Further to this, all advice firms have until July 31 2024 to finalise their first annual board report, requiring them to demonstrate the value they deliver and justify their charges.
But value is inherently subjective and demonstrating it isn’t straightforward.
In line with FCA guidance, more and more firms are turning to client feedback to provide qualitative evidence that they’re doing a good job.
In recent weeks, we’ve onboarded over 100 new firms to Elevation, our enhanced client survey.
We’re now serving more than 7,000 users across 405 firms and networks who use client feedback to both meet regulatory requirements and drive revenue.
In the run up to the July deadline, we’ve analysed over 300,000 clients’ feedback and identified some important trends.
More work to do
The data shows the majority of firms are doing a great job for clients but - across most - there are edge cases.
In particular, the industry has work to do on three fundamental value markers: clients’ understanding of fees, client confidence they’re on track to meet their goals, and the frequency of client-adviser meetings.
Client understanding of fees is a critical first step. Clients can’t fairly assess value without first understanding the cost of the adviser's service, and how they pay for it.
Yet 17 per cent of clients answer ‘not sure’ to the question ‘how do you pay for financial advice from your adviser?’
This should ring an alarm bell for advisers.
If they forget to clearly outline how their advice is paid for, they will fail to meet the requirements of the consumer duty.
In many cases advisers have outlined their fees at the beginning of a client relationship, but haven’t checked their clients’ ongoing recall throughout the duration of their relationship.
This is often easily remedied simply by reminding clients regularly, and repeating information more than once.
Of particular relevance, given the FCA’s ongoing advice letter, 2 per cent of all clients (across the industry) say they speak with their adviser less than once a year.
It’s a minority, but, for context, the £426mn famously set aside by St. James’s Place to pay to clients who may have paid for a service they haven’t received, was based on the assumption that 2 per cent of their clients might fall into that category.
Interestingly, the extent of this issue varies by firm size, with small-mid size firms having the highest proportion of clients speaking with them less than once per year.
This may be because as firms transition beyond single adviser practices, some take a while to embed the right systems and software to effectively monitor multiple client interactions.
