Value in the review process: why the numbers matter

As Consumer Duty continues to slither and shuffle slowly towards us all like a huge, amorphous, non-specifically deadly Black Goat of the Woods with a Thousand Young, I keep replaying two recent adviser interactions in my head.

Firstly, I did one of those adviser profiles in a rival publication (no, complementary publication, we’re all brothers and sisters in this loving, teepee dwelling commune we call financial planning). Below the line comments from other advisers were almost all nice and encouraging. Aw thanks guys. Oh. Except for tom.numbers who openly and angrily marvelled at my tiny /pathetic / unambitious little business. “80 families? I’ve got 300, generating £1m of fees” he brayed, strangely specifically. I picture him looking like the Magikarp Meme guy but even sweatier with an even rounder mouth.

Two things were immediately obvious to me. One, that tom.numbers really needs to spend more time walking in nature and hugging his kids or whatever. And two, that his business must be fundamentally different from mine. Because if I tried to fit 300 clients into my review process (and I really don’t want to, by the way) everything would immediately and spectacularly implode. Reviews for our clients are our core product. They include a lot of necessary - and necessarily time-hungry - elements, and the periodic review part is generally the easiest and the least interesting of these. By the time you’ve had a good in-depth meeting, rerun cashflow projections and stress tests, produced and discussed meaningful portfolio benchmarking, carried out rebalancing trades and wrapper funding, taking account of often complex tax positions which require discussion with other professionals, and packaged this up in a compliant file, you can start to see where the maths leads.

Tragically for me, this means I won’t get to boast about how many clients I have in below the line comments if I ever become as demonstratively inadequate a human being as Tom. But it also means I’m not shafting my paying customers on service quality, so there is that.

Did we really need Consumer Duty to tell us the obvious?  That a busy adviser serving 80 families and a busy adviser with hundreds of families, both providing ongoing services, aren’t doing the same thing? Or they aren’t doing it to the same standard. Or one is pretending to do things the other one is actually doing. I guess we did, because it’s been an open secret for ever that loads of advisers out there just harvest a tidy slice of people’s wealth while knowing they don’t have the capacity to do what they say they will if all their clients ever happen to call their bluff in the same year. I think the FCA should be, probably will be, looking at these things more directly: the extreme variation in what a periodic review process looks like at different firms operating similar charging methods, and the sheer maths of adviser time divided by accounts notionally “under advice”.

The second thing was an advice business owner talking about the need to browbeat clients into their reviews. I get the sentiment - some people need to be chased to do what they know needs to be done. I’ll be honest though; I have a naturally very low tolerance of clients who need a lot of chasing. I think it’s a red flag that says a lot about their engagement with the planning process and their regard for what we do, right up there with “do you do 9pm appointments” and “can I use you for some of my stuff and this other identically qualified adviser for some of that other closely related stuff”.

But again, I think Consumer Duty and the focus on ongoing reviews have shone a light on this kind of half-in-half-out relationship of mutual tolerance. We know that it’s all about value, and that the assessment of value is an inconveniently subjective thing. Once you strip away the deeply flawed, arguably futile bean counting part of value assessment, you’re left with whether the clients themselves feel they are getting value from the relationship. If you have a client that needs to be persuaded to engage with the review process every cycle, can you honestly say you feel confident about how they would answer this question?

Bear in mind it might not be their fault. Not all ongoing review processes are equal, which might be the understatement of the century. Yours might just be really boring, or the emphasis might be misaligned with what clients want, which varies. I think we should be listening to them the whole time about what they value and adapting the process, within boundaries. Based on my own anecdotal evidence in my own minuscule (sorry again Tom) client bank, it’s a rare client indeed that doesn’t find a properly prepared cashflow plan engaging. I find it’s generally the one thing clients of all levels of technical sophistication are interested in. Other than that, it varies a lot.

But if you do all that and you still have semi-engaged clients, I honestly think you should be thinking hard about whether they are the right ones. Proper planning isn’t something you can do to somebody. Worst case scenario is a reluctant client who pays for nothing and is an outsized compliance risk. Everybody loses. The thing is, a lot of us were trained in a sales environment, where we were incentivised to persuade people to use a service, and we got good at it. But the older I get, the more radically stupid this idea seems. If someone needs to be persuaded by clever talk and influencing skills to engage with a service, is it actually right for them?

This is probably where planning and traditional, transactional advice diverge. Planning is a process that only works when it’s a true partnership between client and adviser. We’re fundamentally a team, where one half truly understands the goals and tolerances, and the other half is a conduit into a world of knowledge and tools that help achieve them. It can’t work if only one half is committed.

Maybe on this basis Consumer Duty will mean the final death of financial advice as selling. My hope is that it at least means the death of the damaging false equivalence between a planning service and an ongoing suitability process.

This article originally appeared in Money Marketing, July 2024