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Phil Wickenden: Loyalty is more important than price

Phil WickendenMifid II and rules on inducements are shaking up the thinking of many providers in relation to what they do for advisers, including what support they deliver. And rightly so. What providers should spend their support budgets on is a big concern. But while some are looking at the burden of regulation as a convenient and plausible reason to cut back, this would be a mistake.

We will be addressing the full impact of Mifid II on conflicts of interest in the coming weeks. But, in principal, support that results in the enhancement of the service provided to the client (that is, by better informed and equipped advisers) is permissible.

According to our recent Adviser Influence Guide, business and technical support are becoming more important determinants of provider and platform selection. But as demand has risen, provider delivery has plateaued at best, representing a big opportunity for some fairly chunky return-on-investment on any activity delivered remotely well. Standing out in this regard has never been easier.

Our research shows the importance of demonstrable expertise has risen in over half of the 15 business and technical support areas we measure, most notably in relation to consultant support. No single area tracked has become less important in the past six months. But as the bar has risen, providers’ proficiency has not, which has further contributed to the growing support gap.

We asked advisers to think about the process they typically undertake when deciding which providers/platforms to use, allocating appropriate weighting across key influencers.

While the product/solution (including cost considerations) was weighted as the single most important factor (32 per cent), its importance is not as pronounced as may have been expected given the suitability stakes are so high. Indeed, service (28 per cent) and the overall support package offered (25 per cent) each account for just over a quarter of the decision.

The so-called ‘race to the bottom’ and the pursuit of lower charges has become an obsession in the industry. But with charges, fund ranges and core features converging, providers and platforms that want to thrive will need to look beyond the basics.

Stripping out costs that do not drive value and being competitive on price are clearly important. But that should be just the start. Once you get past the functional things like cost and fund choice (which will not differentiate you for much longer) it is the total experience that makes advisers react. Far better to build loyalty to you, not your price. 

Phil Wickenden is managing director of Cicero Research

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