Industry woeful at communicating value of advice

2 April 2024

The advice profession’s ability to successfully communicate the value of advice to clients is woefully low, according to respondents to Professional Paraplanner’s latest parameters survey.

The survey revealed that 60% of paraplanners do not think the industry successfully communicates the value of advice. In stark contrast, just 16% believe it does and 24% said they are unsure.

A focus on selling products rather than seeking to help people achieve their goals, a lack of understanding around what financial advice entails and a misconception that advice is reserved for the very wealthy were key reasons cited by those surveyed.

One paraplanner told Professional Paraplanner: “There is still a misconception that financial advice is only for those with money. While it is difficult for advisers to advise on lower net worth clients due to the fees, there needs to be something in place to not only help build wealth but build confidence in the skills of financial advisers.”

Others bemoaned the lack of awareness around financial advice in the press, arguing that too many people continue to see advice as a cost rather than an investment.

“We can’t get a loud enough voice in the mainstream press. From experience of working with a PR agency who tried their hardest, financial planning just isn’t as sexy as the latest hot investment tip,” one paraplanner said.

The fear of being scammed also emerged as a key trend, with many paraplanners suggesting that negative news stories and previous scams had prevented the industry from communicating its value to clients.

One respondent said: “Many people still do not appreciate the skill and expertise of financial advice and are still reluctant to pay for this, or they believe they might get scammed, especially those who have fallen victim before.”

The results of the survey also revealed a disconnect between what clients place emphasis on and what advisers consider the most important aspects of financial planning. For a lot of clients, there is a fixation on achieving specific levels of investment returns rather than what they need to achieve to meet their goals, according to paraplanners.

As one told Professional Paraplanner: “Obviously poor performance relative to peers is a legitimate issue but often clients are concerned around areas which can potentially be inconsequential to their overall position and miss the really important things.”

What more can be done?

When asked what more the industry should do to help more people understand the value of financial advice, it was clear from the survey that paraplanners support the idea of more awareness around the industry, with respondents suggesting that the benefits of advice could be relayed by organisations both within and outside of the financial services sector such as accountants, solicitors and bodies like Citizens Advice.

One paraplanner said: “There are too many small firms out there who simply don’t have the resources to get the message out. It needs more work from the FCA, popular commentators like Martin Lewis and the PFS/CISI to promote the industry.”

The sentiment was echoed by a fellow respondent, who pointed out: “At an individual level, we can spend more time educating clients but ideally industry bodies and Government would also provide more education and support to enable people to have a realistic understanding of financial basics and the services professionals can and can’t provide.”

Paraplanners also said it was important to explain the ‘why’ behind financial advice, ensuring that people are aware it involves more than just investment management, and promote it is a regulated profession.

“Products are largely the same, the value and skill is matching the correct funds, trusts and products to a client’s needs and aspirations. It takes knowledge, expertise and application. That is where the adviser earns his corn, not pure fund performance,” one respondent commented.

Another said: “There should be more around the value side to people, less on products and solutions and more on what it can do for the client.”

The concept of embedding an understanding of financial advice in early education also emerged.

 “We should start in school so that children understand the value of looking after their finances,” one paraplanner explained, before going on to suggest that the value of advice should also be emphasised through workplace education, including infographs to help people understand what they have.

Another paraplanner took a similar stance: “Introduce personal finance in schools, with a financial adviser teaching in every school for one hour every week or month.”

Technical and complex language used in financial advice also emerged as a potential barrier to more people understanding advice, with paraplanners recognising that the complexity around advice and charges can be off-putting.

To overcome this, there was a general consensus that firms should take steps to be clearer in their charges and use simpler, more accessible language.

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Professional Paraplanner