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Scott Gallacher: Why advisers might be losing clients

While financial performance is important, advisers need to concentrate on providing a level of service that clients value.

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A fellow IFA recently complained that he had lost two clients to a cheaper adviser, despite delivering those clients excellent investment returns over the last few years.

The main point he was making was, that whilst cost was known and future returns unknown, low cost did not necessarily mean higher returns and that is a point which I would fully agree with.

The IFA claimed his performance figures were much better than most other advisers and he felt that clients should pay his higher fees for his better returns. Unfortunately the key problem is that, as was acknowledged by the IFA, future returns cannot be guaranteed and the FCA would be quick to remind us that past performance is no indication of future performance.

A quick look at that IFA’s website gives you an idea why he might have lost those two clients, as the message is all about investments, pensions, reducing tax and improving the performance of your fund. There is little or no mention of you as the client or your goals or objectives, its all about your money.

The problem is that, without genuine financial planning, the investment or pension you have, or little tax saving you get, might make no real difference at all to the client. That’s not to say that these are not important, or that they do not make a difference, it’s just that they don’t make the ‘real’ difference and are not what clients really care about.

We have all read stories of the old man or lady who lived in a run down home, got their clothes from the charity shop, lived on supermarket reduction food, only to die leaving millions in the bank. Did that old man or lady need to pay a little less tax or achieve better returns? No, they needed a financial planner to tell them that they can afford to spend their wealth or at least gift it away during their lifetime.

Equally there are millions of people spending far too much, investing far too cautiously (if at all) and not protecting their families. If those people die early their families will face a bleak future and if they get to retirement they are going to be in for a shock.

Financial planning, as opposed to simply financial advice, can really change the outcomes for clients by focusing them on their need to change their inputs and their actions. Whilst future performance cannot be guaranteed, the effects of personal action can be. If you save or invest more you will get back more.

It is by embracing genuine financial planning that we as advisers and planners can add real, and quantifiable, value to our clients and that value cannot easily be undercut by other advisers or by non-advisers such as the discount brokers. It’s this value that ultimately clients will be prepared to pay for.

For the record, I do not think the lower cost IFA got it right by gaining those two clients solely on the basis of price as they may have the same problems holding onto them if performance suffers or an even cheaper adviser comes along.

Scott Gallacher is director at Rowley Turton

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. There’ll always be a few clients who think they should get more (or perhaps just the same) for less, it’s the way of the world. And there are probably plenty who’ve been tempted to switch from one adviser to another, attracted by the idea of saving 0.25% p.a.,, only to find that the new guy doesn’t actually deliver a better package of services. It may even be inferior.

    The only (very few) clients I’ve lost over the past year or so have been those who’ve switched their portfolios to a non-advised platform because they feel that will suit them better. That’s their prerogative. The vast majority, though, remain entirely satsified with my service proposition and what they pay me for it. Frequently, they send me e-mails telling me so.

    Value is not just about price. Value means quality at a reasonable price. Were this not so, far more people would be driving cheap cars instead of ones that offer them the right balance of build quality, comfort, reliability and price. Price is only part of the equation.

    As an example, I recently visited some clients for a periodic reiew and advised them, amongst other things, to encash most of their ISA portfolios to pay down their mortgage and effect Trusts to govern their death in service and private life insurance policies. Neither will result in any financial benefits for me (in the short term, quite the opposite as far as their ISA’s are concerned), but they understand and appreciate the value of my advice and will hopefully recommend me to others.

    Whan all is said and done, you can’t please everyone all of the time, no matter how sincerely you try and, let’s face it, we all make the occasional mistake or faux pas. Somebody else will always be offering an alternative proposition that may or may not, overall, actually be better than yours.

  2. A very narrow view I feel, on the basis of Mr Gallacher spurious musings it must be a wonder to him why Hargreaves Lansdown and St James Place are the most successful advice businesses in the UK.

    Only a small percentage buy into the planning myth. Like only a small percentage of people use stone masons. Most want a good bricky who can build them a wall at a low cost.

    Get some perspective sir, move out of your planning bubble.

  3. Am I a planner? Am I an educator? Am I a facilitator? Am I a councillor? Am I a strategist? Am I trusted?

    I hope I am all of these.

    I have in the past mowed lawns for and sold cars for clients too..:-)

    I always find it hard to explain exactly what it is I do and how I get paid to be able to do it!

  4. Am I and educator? Am I a Planner a strategist? Am I a confidant? Am I a facilitator? If I don’t do I know a man who can?

    Of course I can be one or all of these depending on the client and in this ever changing world I need to be flexible and to be able to offer the right service at the right price….

    JOAT

  5. Precious few clients are remotely interested in bothering to check whether or not what they’re being charged is the going rate or slightly more or slightly less. It’s all about relationships, communications and results (even if the latter aren’t always going to be strongly positive) ~ and, of course, your clients’ perception of you and the service you provide.

    Do you seem honest? Do you seem decent? Do you give straight answers to straight questions? Do you (at least seem to) know what you’re talking about? Are you always presentable? Do you have a sense of humour (and know when not to be humourous)? Are you interested in them for things in their lives other than just their finances? Do you give them the right amount of time when you meet them for a review? Can they talk to you? Do they understand your explanations of things and the contents of your periodic reviews? Can they get in touch with you when they need to?

    There’s so much more to adviser:client relationships than just cost. SJP know this very well and look at how successful they are.

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