I frequently hear people looking for value and more often than not, they mean cheap. But value doesn’t mean cheap, value actually means something's worth; what an individual feels they are prepared to give up to obtain that service or item.
When you look around, you’ll see that people have very different perceptions of the value of goods or services. For some a humble 25p BIC biro will suffice as it allows them to write perfectly well. Others want the luxurious feel of a £500 Montblanc pen when writing their shopping list.
The cheapest 4x4 you can buy at time of writing is a Dacia Stepway at £13,406 and I’m fairly sure it will do almost everything just as well as a £99,375 Range Rover, however some will denote the Range Rover provides more value due to its prestige, look and feel.
In A New Consumer Duty, the FCA talk about ensuring that clients receive fair value, which a lot of advisers have taken to mean lowering their charges. When I spoke to the FCA recently, they confirmed that value was in the eye of the beholder and as long as the adviser could show their charges provided fair value, the FCA didn’t have a problem with them. The only caveat on fees is that advisers shouldn’t offer the same service to different people at different prices.
If you look at the financial advice landscape at present, there are a wide range of charging structures out there. I’ve seen as low as 0% initial and 0.25% ongoing. I’ve seen as high as 7% initial and 2% ongoing (I think we all know who that is!).
Interesting customer satisfaction from a national who are at the top of the charging scale is very high. In fact, more than being satisfied, their customers are advocates, actively telling others about their adviser.
Instinctively we all think “but they’re paying so much than they need to”, however they perceive what they receive as value for money. Why? They often report feeling special. They feel special because they receive a hamper on their birthday and at Christmas; they are invited to wine tastings, and cultural events all of which makes them feel valued and from which they perceive they are getting value.
So, if you’re wondering if you should put your fees down because of Consumer Duty, the answer is almost certainly no. You may even want to put your prices up based on the additional work Consumer Duty bring to your business! Financial Advice customers don’t shop around based on price so don’t be scared to charge what you’re worth.
The question is “what are you worth to your clients?” The only way to find out is to ask them. Consumer Duty requires us to embed the feedback cycle into all elements of our business so go on, be brave and ask – I think you’ll be pleasantly surprised by the response you get!
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We frequently review firms propositions, using our market knowledge and experience to increase profitability whilst making things easier to administer. Don't leave yourself being cheap when value is what's required.
