The majority of advisers are relying on portfolio performance to evidence value in line with the new Consumer Duty principles, rather than measure the true value of advice, a new report from NextWealth has revealed.
A report delving into the implications of the Consumer Duty for the retail wealth management supply chain found that 73% of advisers said they would document performance of the portfolio to evidence value to clients.
The next most common was milestones against client goals and objectives.
Heather Hopkins, managing director of NextWealth, said: “Relying on performance data to evidence value is incredibly risky, particularly when markets are so volatile. Not only does it put too much emphasis on market conditions, it fails to measure the planning and emotional support that clients value most from working with an adviser.”
The report also surveyed consumers who pay for ongoing advice, with the general consensus suggesting that they generally perceive their ongoing fee as a “fair way” to remunerate their adviser. Clients feel assured that their adviser is working in the background in their best interests rather than only looking at their investments during chargeable hours or projects.
However, only one quarter of advisers are ‘fully confident’ that they can calculate the expected total cost the customer will pay, despite this being required by MiFID II. A further 53% said they felt ‘confident.’ Meanwhile, only half are fully confident or confident that they can track costs incurred in delivering service to clients.
Hopkins added: “Advisers struggle with the intangible nature of documenting value. Performance against benchmarks is easy to collate and report but it fails to assess the true value of financial planning and advice.”
According to the report’s suggestions, advisers should consider asking clients what they value via client surveys, tracking time spent and tagging client objectives in the CRM as well as tracking goals set and goals achieved at a firm level.
The report, Consumer Duty: Implications for the retail wealth management supply chain can be accessed via the NextWealth website.
