Demonstrating value for fees

The value of advice

This is a phrase we are all familiar with. It is on this premise advisers justify the fees they charge clients. And rightly so. Paying for good advice has clear benefits. Wouldn’t you want to live comfortably in retirement without having to worry about the inability to meet your essential spending needs? There are some clients who might question the “wisdom” in paying for such advice and decide to do it themselves. So how viable is this option…?

Robots or Humans?

At the end of last year, the FCA released a report that reviewed the Financial Advice Market. On the issue of fees, there were some interesting and insightful observations. For example, it is noted that automated advice is crucial to a reduction in fees paid and leads to better client engagement. This type of advice also usually means lower costs compared to the traditional “holistic” advice model. However, people still want that human interaction and the reassurance that someone was available to help them if something did go wrong when creating their retirement plans.

The usual suspects

Broadly speaking, the “value added” by advisers over the course of their clients’ retirement should cover spending strategies, tax optimisation, asset allocation and rebalancing as well as the psychological element of giving the client the confidence to “stay the course”.

So, when does it become difficult for an adviser to justify what he or she charges their client? Not all clients are in the same stage of retirement at the same time so there is an argument for different charging structures depending on the client’s retirement phase. Also, some retirement plans are complex and take painstaking effort to put together. In such a scenario, an adviser can readily explain why the charges might appear a little steep.

Value for money

The debate about fees is one which will rage on for years to come. Demonstrating value to clients will become ever more important, especially if the regulator decides to focus on “value for money” in the provision of advice. In addition to the elements mentioned above, Timeline can also uniquely monitor the performance of retirement plans in real-time. I don’t think there is any client or prospect out there who will not be intrigued by such a concept and for the adviser, having that conversation about their fee or charging structure will no longer need to be an awkward conversation.

https://www.fca.org.uk/publication/corporate/evaluation-of-the-impact-of-the-rdr-and-famr.pdf

Toyosi is the Pension & Technical Consultant at Timelineapp. His experience is in Financial Services and consulting (“Big-4”). Toyosi has the IMC qualification and is a member of the CFA Society of the UK and the Chartered Insurance Institute. Toyosi is one of our content contributors and is often writing articles on retirement and the sustainable withdrawal framework.

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