Tim Sargisson: Knowing the price of everything, the value of nothing III
With the value of advice once more under scrutiny, Tim Sargisson has a suggestion for how advisers might better demonstrate their value without being asked to prove it by the regulators
This is the third time in as many years I have used Oscar Wilde’s words as the title for my monthly Professional Adviser blog. Once again, the question of value and advisers is back on the agenda.
This time the Work and Pensions Committee is to examine if pension customers see value for money from advisers, in a new inquiry launched earlier this month. The central question is about whether enough is being done by the industry to make sure savers receive good-value, impartial service from financial advisers.
A dozen years ago, the then Financial Services Authority launched its ‘Treating Customers Fairly’ initiative to ensure fair treatment of consumers by delivering enhancements in aspects of the products and services firms offer – improving product design, quality of service or value for money.
In its most recent business plan, the Financial Conduct Authority (FCA) expressed concern about advisers giving “insufficient attention” to the total cost of investment products and advice, which results in poor value for money.
Under Mifid II, the product governance rules have brought the regulatory expectations in this area more into focus – for example, by allowing the FCA to ask advisers how clients are segmented and what products they use for each segment. The interrogation over ‘value’ seems endless.
Tim Sargisson: Knowing the price of everything, the value of nothing II
There is no doubt that what has rattled the Work and Pensions Select Committee is the British Steel debacle and the overriding memory of members being lured with cheap deals – retirement options thrashed out over the extra incentive of a ‘chicken and chips’ supper. Added to this is the ‘factory-gating’ allegations aimed at several firms.
I fully accept and completely recognise that 99.9%, or more, of the current 26,311 advisers in the 5,281 retail advice firms will argue long and hard about the excellent value they provide for their clients.
It certainly helps us to agree with that view if we ignore those advisers and firms who are no longer with us, having gone bust and left us all with a bill of more than £400m, representing the amount paid out in compensation last year through the FSCS. We all accept and understand that recommending a toxic UCIS product and charging for the privilege hardly qualifies as value for money.
But these headline grabbers are not the real issue. That is the simple fact that, by and large, we are lousy at demonstrating to clients and customers the added value our services provide. So, what is to be done? How can advisers better demonstrate their value, without being asked to prove it by various regulatory bodies?
Inspiring Action
As a start, I would recommend watching Simon Sinek on Ted Talks. Some of you may already have come across him and seen his talk on How Great Leaders Inspire Action. If you have not, however, I urge you to spend 18 minutes of your summer break adding to his 39.9 million views to date.
Sinek’s point is simple and yet so relevant to all of us caught up in this ‘demonstrating value’ conundrum. He explains how everyone knows what it is they do, most people know how they do it, but very few people explain why they do it.
In our profession, every one of us is entirely comfortable with telling people about what we do and how we do it. After all, we have been doing that for years – about how you are an independent adviser and how your firm selects funds from the entire fund universe.
Yet it is uninspiring stuff and this approach is unlikely to add value on its own – especially as we are obliged to point out that these same expertly chosen funds can go down in value as well as up. Which hardly qualifies as a USP.
In Sinek’s view, the trick to adding value is to tell people why you do it – for example: “Why I do what I do is to ensure you do not run out of money in your retirement. Every conversation I have with you, every time we meet. is about ensuring everything is running to plan”. There – you are delivering value and a USP in one sentence.
As Sinek puts it, the goal to adding value is not to do business with everybody who needs what you have. The goal to adding value is to do business with people who believe in what you believe. Because, as he goes on to say, people do not buy what you do – they buy why you do it. That is where true value lies.
Published on 14th August 2018
