A few months ago, I pulled a muscle in my lower back which was total agony. I went to see a sports therapist, who carefully and diligently carried out an examination. She then carried out a massage to ease the inflammation.
At the end of the consultation, the therapist gave me some advice on exercises I should do each day to help ease the pain, and advised me that I should return for a follow-up massage in two weeks.
I duly returned to the therapist two weeks later, feeling much better having carried out the physiotherapy she recommended for me.
After she had carried out the massage she said: “While you’re welcome to come back for more sports massages, I don’t think that’s necessary. If you do the exercises I’ve advised, you should be fine on your own. Feel free to come back if you have any further symptoms.”
This story demonstrates true professionalism. The therapist had more knowledge than me on what I needed. I’d have happily paid for more treatments had she recommended them and she’d have made more money from me. But because she put my best interest ahead of her own, I have so much trust in her that I’ve become a one-man marketing machine, introducing her to several family members and friends.
There has always been a tension in financial services between what is in the best interests of clients and the businesses that serve them.
For businesses providing financial advice and related support services, the potential for conflicts of interest is one of the reasons we have today’s financial services regulation.
The move over the past decade by many advice firms to provide ongoing advice and service – primarily through charging a fee based on a percentage asset under investment management – has made the sector professional, capable and profitable.
But while it’s good to see all firms now having clearly defined service propositions and fee structures, I can’t help but think that a significant minority of clients are being ‘sold’ an ongoing service that, while it helps the firm meet its commercial objectives, is not in some of their customers’ best interests.
An ongoing advice service might not be in a person’s best interests if the cost of providing it outweighs, on any reasonable measure, the benefits provided.
For example, delivering peace of mind and saving people time are valuable benefits, but are difficult to quantify and measure. Whereas taking all the equity risk premium from a client’s portfolio through ad valorum advice and management fees is not.
In some situations, your service won’t be appropriate for clients, and turning them away, as many firms already do, will be the right thing to do.
But what about clients who would get value from ad hoc advice or perhaps only need to pay for a review every three years, or when a life event happens?
Do you have a service proposition that serves their best interests
or do you still provide them with an ongoing service that does not?
Suitable and appropriate advice should also consider value for money for the customer, not just meeting their financial objectives.
In that respect, making sure you have an approach that ensures you can demonstrate that the service you provide is appropriate and good value, will minimise conflicts of interest and turbo-charge your marketing.
Jason Butler is head of financial education at www.salaryfinance.com