There’s a spectacular level of discussion on the topic of value for money in financial services.
Much of this is well-founded, for there are still too many people making too much money by delivering too little. That said, Seth Godin also reminded us recently of the tyranny of the lowest price.
At the risk of getting a bit Einstein, it seems that much of this is about relativity.
What are the relative costs of delivering each element of the value chain, and what is the relative value when compared with what customers were doing before?
Our data (that is, facts) tell us that ongoing fees are falling right along the chain.
They are down around 8 per cent for advice, 12 per cent for us and about 15 per cent for asset management over the last five years.
Now perhaps none of these numbers are seismic in themselves, but they might reflect a collective annual saving of £36m per annum across our customer base. Which feels not too shabby in terms of progress.
Of course, there is a way to go with this and there will be further fee pressure across the board.
It should fall least in the advice channel as this is the most people-driven, least scalable component. It is also the closest to the client.
Platform fees will continue to fall but most likely at a rate which correlates to the quality (and relevance) of the online proposition and the offline service supporting it.
Asset management fees will accelerate downwards as the reality of the spread between retail and institutional pricing becomes better understood. And more thoroughly questioned.
This takes me back to the relativity value when compared with what the client was doing before.
Seems like some larger advice outfits are actively churning clients into in-house fund management, or fund, er, ‘solutions’ which have been white-labelled from others and which the advice firm has an interest in.
1) In a time when asset management pricing is being exposed and is set to fall substantially, why are customers being shovelled into more expensive, old-school options?
2) Is it durable to build an advice business or a vertically-integrated consolidator on this premise?
3) Is it sensible to be a customer of either, or to be an advice firm that sells into one of them?
I was also recently reminded of this blog from 2016, which still seems to resonate.
It seems to us that being high touch on the human and hi tech on the rest is the future for the financial planning profession.
The more this is true, the more advisers will win and the more retail asset managers will have the most to lose.
Platforms can play a substantial role in empowering this transition (and avoiding the tyranny of the lowest price) or they can unapologetically drive the distribution of expensive, mediocre fund management.
I know where we sit. Firmly.
P.S. I can't stand Dire Straits.