The vast majority of financial advisers focus too much on portfolio performance and fail to evidence to clients the value of their advice, a new study suggests.
In an adviser survey on the impact of the Consumer Duty, wealth consultancy NextWealth says that advisers are too focused on investment performance.
NextWealth surveyed more than 400 financial advisers in the summer about how they document their value to clients. Some 73% said they used clients’ portfolio performance as their main measure.
The next most column evidence sent to clients to prove value was milestones against client goals and objectives, reported by just under half of advisers.
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 a financial adviser.”
The report also surveyed 302 consumers who pay for on-going advice and conducted in-depth interviews with 10.
It found that ‘generally’ clients see an ongoing fee as a “fair way” to remunerate their ‘always on’ financial adviser. Clients says they feel reassured their adviser is working in the background in their best interests rather than reviewing their investments only during chargeable hours or when carrying out projects.
NextWealth said some of the metrics advisers can use to ask clients how they measure value is through surveys, tracking time spent, tagging client objectives in the CRM and tracking goals set and goals achieved at a firm level.
Ms Hopkins said: “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.”
The report looked at how prepared advice firms are for the FCA’s new Consumer Duty regulations and addressing.
The report, Consumer Duty: Implications for the retail wealth management supply chain can be downloaded from the NextWealth website.
• NextWealth carried out a quantitative survey of 327 financial advice professionals (financial advisers, Paraplanners and ops managers) in August, with a top-up survey of 102 financial advisers conducted in October 2022. It also conducted a quantitative survey of 302 consumers paying for on-going financial advice in September.
