Some 43 per cent of advisers felt pressure on their charges in 2020.
This was one of the headline findings from the Schroders annual financial adviser survey, carried out at the end of last year.
At the same time, findings from FCA were painting a picture on consumer attitudes towards advice.
As part of its work on the impact of the RDR and Financial Advice Market Review, the regulator found that the number one reason given by people with cash to invest for not taking advice was that they would not benefit.
The paper also revealed that most people who would seek advice expect to pay no more than £250, regardless of the amount invested.
Seems like we have an interesting challenge.
Both pieces of research serve to reopen the long-running debate around the price and value of advice.
Advisers are reporting price pressure, and potential clients are saying they don't recognise the need for advice and aren't prepared to pay much for it.
The challenge in all this is that the only person who can assess value is the client, who will base their perception of value on how the service proposition was described to them at the outset.
Save, invest and take risk
Post-RDR, a plethora of new service propositions were created.
These were designed largely around the number of client meetings and the issuing of statements, annual reports and newsletters. With the benefit of hindsight, these activities did not reflect the value of advice, and the world has moved on.
A report by the International Longevity Centre indicates the value of an adviser can be put down to:
- Getting clients to save, invest and take risk
- Getting them to stay invested
- Maintaining client confidence
It might feel somewhat simplistic, but looking back at last year many advisers spent a significant amount of time encouraging clients to stay invested and ‘weather the storm’.
Following the initial downturn, the subsequent bounce has meant many clients are in a more comfortable place financially and emotionally because of their adviser.
The value of the adviser’s role here cannot be overlooked.
The FCA has made it clear it wants more people to invest. What's more, it has identified that 37 per cent of clients with more than £10,000 to invest held cash only.
In its latest review of the advice market, the regulator went as far as saying this could lead to "potential harm".
It gave the example of a client investing £10,000 in cash between 2008 and 2018 who would now have £11,720. Yet if they had invested, this would now be worth £21,905.
So if we want an example of the value of advice, we need only look at this FCA paper.
This idea of reassuring clients and keeping them invested is also where advisers add value on an ongoing basis.
A good night’s sleep
The FCA suggested that 90 per cent of clients are being placed into ongoing charging models which the FCA feels may be inappropriate.
But actually, active steps taken by many advisers during the pandemic can in fact support the case for ongoing charges.
With market volatility, one adviser described their role in early lockdown as "propping up clients emotions".
Backing up the FCA’s point about clients holding cash rather than investing, 2020 was a real live demonstration of the value of ongoing advice. Advisers proved this value by holding clients’ hands and reassuring them about staying invested.
If you are among those feeling that your fees are coming under pressure, then it may be a case of understanding how to articulate the clear value you deliver.
Gone are the days of ‘gold, silver and bronze’ service propositions. The value of advice is quite simply to make sure clients get a good night’s sleep.