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Deliver what you promise

Success under the RDR will depend on clearly explaining the value of your proposition and then delivering what you have promised


We’ve been talking for years about the need for advisers to price their services based on value and to break the link between the payment for that service from the mechanism by which it is paid; which has traditionally been through the product whether that be a commission or a percentage of the value invested.

As soon as these conversations occur we have a tendency to get side-tracked by debates about whether clients will be happy to pay upfront for advice and what price the market will bear. These debates increased in number as the RDR deadline approached, but now we are in the new world advisers should be discussing with their clients how much they are being paid for their services and what they will deliver, along with distinct differences provided by the other parts of the food chain, for example the fund manager and the platform.

There are two key elements to consider here. First, how do advisers demonstrate value to their clients and second, how do advisers ensure that value is delivered consistently across the business? In each of these areas the starting point must always be the client.

Know your clients and their needs

What type of people are they and at what life stage? What are their typical hopes and fears and what are they looking for in a quality adviser? What does it mean to them to receive the service that they are looking for? Where might they go for advice and what does your competition offer them and at what price?

What is really important is to recognise that your service will not be for everyone and to consider carefully who your target market is. There will be several clients who will not place a value on your services and, incidentally, who you also may not value as clients.

There are also a group of clients (research suggests around a third) who are highly price sensitive. The good news here is that the other two thirds are at least willing to have a conversation about your offer and consider whether they believe it represents value for money.

Communicate your promises

I am avoiding the word ‘proposition’ here because ‘promise’ makes the assumption that something actually has to be delivered. But you need to articulate what is it that you offer for your clients and is this consistently communicated in everything that you do?

This involves the development of your ‘story’ that tells your clients who you are, what you do, why it is important to them, what they can expect to receive, what the benefits are and how much it is going to cost them.

Testimonials and recommendations from satisfied clients or other professionals are likely to result in clients who are best suited to your offer.

This is an area where advisers often feel they should be prepared to offer discounts to clients in some circumstances. Clearly if the pricing has been calculated appropriately based on the cost to the business of delivering the service and the perceived value to the client, then discounting should never be necessary.

Be prepared to be flexible if the client is able to offer value to your business in other ways (through introductions to other valuable clients for example) but also, be prepared to back off if it feels like this may not be a productive relationship for you.

Deliver what you promise

The objective here is to ensure that you can deliver your promise at the lowest sustainable cost without compromising on the quality of the delivery. Delivering your promise efficiently means that you can capture margin and/or position your price at a competitive level if you are seeking to grow market share.

This is all about ensuring you are exploiting your own strengths and utilising the strengths of others where they are better able to deliver a service on your behalf, can deliver it at lower cost or can help you reduce the risk by relying on their expertise.

In the world of financial advice this will involve considering how you can specifically add value and whether there are other ways of delivering that value that ensure consistent delivery to the client. Most often this will involve consideration and selection of business partners in areas such as:

  • back office administration (practice management systems)

  • portfolio construction (attitude to risk, asset allocation and model portfolios)

  • implementation and management of investments (platforms)

  • investment management (discretionary managers, multi-managers).

As these components combine to deliver your value proposition it is important to consider your approach to due diligence in selecting a partner that you can trust and that can add value to your business.

In the platform space any adviser should consider the extent of the support offered alongside the usual hygiene factors such as price, tax wrappers, functionality, investment range and financial stability. What value can the provider offer to the adviser business that enables you to demonstrate value to your clients and maintain your margin?

The other areas to consider in your due diligence should be the service quality you can expect, the training and support available to help you gain the maximum efficiencies from the platform and, of course, the extent to which the provider can support you in growing and developing your business through consultancy support for example.

Remember, these providers are there to support you in delivering your proposition to your clients.

Of course, price will be one of the key considerations but value and quality should also be thoroughly investigated.

David Thompson is managing director of Elevate


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