Some of these examples we can quantify really easily, such as the IHT mitigation for example. That is a tangible number. But others are not immediately as easy to quantify.
And this is where thinking about behaviours comes into the mix. And starting to drill down into the ‘benefit’ part of some of your softer services.
It is all about behaviours
If we say that fair value is all about the benefit the client can reasonably expect weighed against the cost, then we must think about how we define ‘benefit’.
Advice firms arguably have an easier job at this stage, because it is really easy to align what they do with their clients' goals and objectives.
So advice firms can look at their advice services and ask themselves the question: 'Does what we offer to our clients allow them a significantly better chance of achieving their goals and objectives compared to not taking our advice services?'
And when answering this question, you have to show your workings.
So how does behaviours fit into all of this?
Well, think about it. If your client did not have an adviser, and was doing everything themselves from a financial perspective, how would they behave differently?
- Would they invest in the same products?
- Do they have the knowledge to know how to use the most tax-efficient wrappers?
- Do they understand the intricacies of their myriad of different pensions, and why one with that protected pension commencement lump sum might be better off staying where it is?
- Do they understand the most tax-efficient way to take income?
- Do they understand risk and their ability to bear risk?
- Do they know how much they need to save to retire at their target age of 55 on £50,000 a year?
- Do they understand the effects of inflation on cash deposits?
And the list goes on.
But all of this ‘stuff’ is vital in you evidencing the benefit in what you provide, because there is a real tangible argument that says without an adviser a particular type of client will not use different wrappers or their allowances appropriately (if at all), because why would they? They are not financially qualified professionals.
And there is a lot of research that has been done over the past 15 years around financial behaviours of individuals in the UK.
There is evidence to suggest that individuals in the main save significantly less when they do not receive advice. There is evidence to show that individuals typically invest significantly less without an adviser and hold more assets in cash deposits.
And this is really important when we think about value, and the benefit advisers add.
Because what advisers must do is ask themselves the question of every single element of their service proposition: 'If my client did not receive this service, how would they behave differently?'
And the answer to that question is how you then begin to make the intangible, tangible.
So let’s go back to the first example: peace of mind.
