A spotlight on fair value for financial planning customers

The financial advice industry is something of a curate’s egg, particularly when it comes to ensuring fair value for clients.  The current options for those seeking to take advice owe more to the long-term development of charging models and the successive, and I believe well-intentioned attempts of rule makers to provide absolute transparency and choice for clients, than they do, a demonstrably level-playing field.

Introducing subjectivity through concepts of value, fair or otherwise, can complicate thinking, but I can see the benefits in firms having to justify and illustrate how their customers feel about what they value and firms having to re-consider or even re-write their playbooks for this.

Doing what is right 

My experience of those who own, run and work within IFA businesses is that they are genuinely driven by doing the right things for clients.  Its perhaps not a popular view of financial services, but we generally want the best for every client and place their needs first.  In fact, at Francis Clark Financial Planning we are fanatical about this.

As with every piece of centrally driven regulatory change, firms take a deep breath as they try to understand not just what they have to do but what is the spirit and intention of the change.   This has never been truer than of Consumer Duty.  I can be as clear as day on this, I welcome consumer duty and I think the principles of fairness and the drive for transparency are significant steps forward for an industry which has been characterised as the opposite.  I am not a sceptic and at Francis Clark Financial Planning we have intended from its announcement, to question ourselves hard about whether we live up to this and what changes are needed.  There are other views!

Media focus will inevitably be on the significant alterations to the largest firms approaches to charging and we have seen some significant announcements to charging rubrics in recent days. I would say, in principle I am against exit charging simply because it must limit choice and ease of change for clients.  That is not the same thing as it being wrong or unethical.

Adding value

Financial Planning is an increasingly expensive activity and discipline to operate and henceforth the marketplace has been consolidating at a breath-taking pace.  Standards have been driven upwards and clients I believe are now treated both ethically and fairly in the vast majority of what I see in the industry.   Value for customers cannot simply be the same as reducing profit for firms.  Profit provides innovation and invites talented humans into an industry.  Financial Planning needs both of these.   We should therefore be equally concerned by the numbers of firms who are giving up and allowing themselves to be consolidated as clients who may not be receiving optimal value.

At Francis Clark Financial Planning, recent rounds of client feedback and interview have prompted us to think seriously about value.  Value is the ultimate subjectivity, our client interviews show that for some this means the feeling of negotiating the lowest fees on the way into relationships, for others its about what they receive post advice, and for some just an abstract thought about trust and reliability.

Consumer duty has brought these questions directly to the surface and prompted us to ask the following questions at Francis Clark Financial Planning:

We have spent a great deal of mental energy deciding how we separate what we do for clients into different services.  I am really confident that whichever of our services our clients sit within, there is a direct correlation between what they need, what we provide and our mechanism for charging.

How important is independence to clients?

As ever it depends where you stand.  For some customers, it is a non-negotiable, they simply do not want to be tied to a pre-determined range of outcomes.  Equally, a proportion of clients will not understand or be interested in the distinction.   For Francis Clark Financial Planning it’s a significant part of how we explain ourselves, not just in creating distance and financial space between the advice and the solution, but real clarity of each parties’ role.  I am not sure whether the industry is significantly clear about the differentials in the restricted and independent models – language used by some restricted firms, could easily confuse.

Do customers understand what their advisors and their firms actually do?

This is important for value, at Francis Clark Financial Planning there is a huge range of activity that supports the experience the clients get.   We have been thinking hard about how we might show that to clients.  Feedback from customers when asked about value is often about being convinced that something is going on between their regular reviews and we are eager to shed some light on this.