What Price for Advice?

FCA Focus on Client Value in 2018

2018 promises to be an interesting year, with the FCA showing increased interest in the value that financial services firms offer their clients.

Asset Management Market Study

The FCA’s Asset Management Market Study Policy paper, published in April, requires fund managers to increase transparency over costs and appoint independent directors to their boards. The fund manager’s Independent Chair must ensure the firm complies with its value assessment duties and acts in the best interests of investors.

Investment Platform Review

The FCA’s Investment Platform review report, due by the end of June 2018, has prompted some commentators to speculate that advisers may soon need to pay the costs of the platforms they recommend. This would place greater emphasis on how charges affect investors’ money than many firms currently apply when selecting preferred platforms. This raises the question: will costs now outweigh legacy, financial stability, and service considerations?

The Next FCA Focus

Some industry commentators suggest that the FCA may next scrutinise the cost of receiving financial advice and the value added by seeking advice. Costs have risen for most firms over the last five years and will likely continue to do so. Regulatory costs, professional indemnity cover, and general business expenses have all increased. Firms can only reduce costs so far before business effectiveness suffers.

Focus on Client Value

Instead, firms should focus on the value provided to each client every year. Under RDR, many firms segregated client banks and offered differentiated charges with corresponding service propositions. For many clients, this works well. However, for some clients, it may be worth reviewing the value offered. Could a similar service be provided by alternative means? Would the client benefit by paying slightly more for a higher service level?

Preparing for FCA Scrutiny

If the FCA addresses this issue, reviewing and considering your approach now could save time and effort later.

For more information, get in touch with our team today