Results from our latest poll indicate advisers think there is a long way to go before their clients are able to appreciate the value of the financial advice they deliver.
Responding to our question of whether advisers believe their clients perceive they are gaining value from the fees and/or commissions they pay, only 18% of respondents thought that more than three quarters of their clients perceived they were receiving value.
The most popular response from advisers so far is an estimate that between half and three quarters of their clients see the value of the advice solutions delivered (35%), while another 18% thought the proportion was between 25% and 49%. A further 12% thought this number was lower than 25%.
Part of the issue, based on the comments we have received, relates to how the adviser is remunerated. The general sense is that commission-based remuneration (ie: mostly life insurance advice) does not promote a ready opportunity for the client to appreciate the value of advice they receive. One adviser noted that, for commission-based remuneration on insurance advice, the fee that his clients are prepared to pay for this advice is only a fraction of the cost required to deliver it.
Meanwhile, Experience Wealth Advice’s Steve Crawford challenges his fellow advisers to ask their clients two key questions in order to establish how much value they place on each advice area they are provided:
- Of all the things we do for you, rank A-Z what you value the most to the least
- Of those advice areas, which are you most likely to refer a potential client to us for?
Feedback from the risk store’s Sue Laing suggests that not enough advisers are asking such questions:
“Surveys of financial advice clients by advice practices … are still not the norm, despite so many organisations offering, variously, the stats to support the value of client surveys for business strength and growth and/or help with the construction, conducting and analysis of those client surveys”.
While so many messages from the financial services industry to advisers are all about client engagement issues and delivering value, it would appear that only a minority of advisers are comfortable, not only that their advice represents value for money, but also that their clients perceive this to be the case.
Where does the value of your own advice proposition stand – through your own perspective, but also from the perspective of your clients?
Tell us what you think, as our poll remains open for another week…
I believe that ‘insurance commissions’ should not be bundled into this ‘Fee for advice’ arguement in any way. A commision is a reward to a salesperson for selling a companies insurance product. Lets face it, people aren’t knocking down our doors wanting to buy insurance cover, it needs to be sold. It has very little to do with the question of advice. The cost of advice is a seperate issue. The advice should be independant of the product provided, because ‘the advice’ and ‘financial knowledge or expertise’ is the product that the adviser is essentially selling and is rewarded via Fee for Service or Fee for Advice(which is what I prefer to call it). These two distinct things must be treated independantly going forward in this debate. Advice is usually wholistic in this day and age and would usually extend far beyond a particular insurance product being sold if you have a competent adviser.
If we compare commisions to say the Real Estate Industry, their charging model is built solely around commisions, and they essentially don’t charge for their advice. Financial Planners however value the advice they give and charge accordingly for it. The difficulty is getting the client to see the value in the advice we provide. Mixing commissions into the debate is pointless, as they have little to do with strategic advice advisers provide.
The FPA and other institutions would like people to believe that we advise and we don’t sell anything. Lets just be honest, we do both. We advise AND we sell products like every other industry. In saying that I don’t see a conflict of interest here as every product provider seems to offer exactly the same incentives in regards to commissions, therefore I don’t know of any advisers that are swayed by one product over the other, except for service quality issues(e.g. underwriting/admin/claims experience/bdm). Commissions therefore don’t have a place in the ‘conflicted renumeration’ and FFS debate.
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