TECHNICAL TALK
PRICE AND VALUE SEEMS TO BE THE AREA THAT MAY REQUIRE ATTENTION , WHICH PROBABLY LEADS TO DESIGNING A FULLY FORMED METHODOLOGY , MAYBE MORE THAN “ WE ’ VE ALWAYS DONE IT THAT WAY ” OR “ THAT ’ S WHAT WE DID AT MY PREVIOUS FIRM ”.
Look to subdivide each strategy into a logical methodology such as what does the regulator want ? How do we do that ? And what collateral do we need in place ?
• Consumer Duty requirements : Explains what the regulator wants
• Meeting the Consumer Duty requirements : Explains how the firm will do it
• Additional collateral : Additional information or references
This gives you a framework in order to meet regulator expectations . Interestingly , two of the four outcomes you probably have in place already , albeit dotted around your hard drive in your ‘ Compliance ’ folder . When we looked closely at the ‘ Communications and Customer Services Outcome ’ it became noticeable that we already had lots of templates / procedures / documents in place which could manage quite a lot of this , in areas such as :
• Code of Conduct
• Complaints Procedures
• The Firms Advice Process
• Treating Customers Fairly
• Conflict of Interest Policy
• Product Governance
• Centralised Investment Proposition
• Client Agreements
• File Review Procedures
It would not take much to put a narrative around it and crossreference procedures already in existence . What about the other two outcomes , ‘ Governance of Products and Services ’ and ‘ Price and Value ’? Let ’ s take each in turn …
Governance of Products and Services : This area is very much covered by Product Governance ( PROD – do you see what they did there ?). The first step you need to undertake is identifying your target market ( which would involve client segmentation ) and the second is assessing financial instruments . When segmenting clients , don ’ t get this mixed up with how you would segment for charges ; what we ’ re talking about here is segmenting on client circumstances or commonalities . During the consultancy sessions we do with firms , it is quite common to segment on pre- / post-retirement and accumulation / decumulation . When assessing financial instruments , look at the big picture , look at everything out there that would enable you to provide financial advice , from deposit-based investment through to risk-managed funds , MPS , DFMs – everything , and also include within that list products and platforms . Often , when we collaborate with firms , they tell us that [ INSERT NAME OF INVESTMENT PROVIDER ] provides their CIP . Well … no . No , not really . [ INSERT NAME OF INVESTMENT PROVIDER ] provides a financial instrument ( out of the dozens of financial instruments available ). It most probably does an excellent job for certain clients , but surely there are other instruments which could also be considered and equally of benefit and of value ? Secondly , what independent research and due diligence is undertaken within the [ INSERT NAME OF INVESTMENT PROVIDER ] market ? Is the firm able to demonstrate that their preferred [ INSERT NAME OF INVESTMENT PROVIDER ] is best of breed ?
Price and Value : Value is an interesting one . Benefit does not equal value , it is worth making that distinction . Take my mother-in-law for instance : she is 82 , born and bred in Wigan , and pootles to the shops and back ( usually to buy me pie for when we visit ). Her car insurance was due recently and I overheard the salesperson talking about the benefit of European insurance and that it does ‘ this ’ and it does ‘ that ’. You can work out for yourself the benefit to an 82-year-old on a pie run to the shops and back . There is a price for this benefit , but it is of zero value to her . How would you apply this as a distributor when you consider the price and value of your advice service ? Firstly , a number of questions :
• What format are your charges in : flat fee / hourly / percentage ?
• What methodology do you use to arrive at your charges ?
• How much does it cost to provide your service ?
• What is the justifiable minimum and maximum charge , and how did you arrive at that ?
• Can you demonstrate that your charges are of value ?
• Can you demonstrate that your charges are clear , fair and not misleading ?
These are some of the questions you may want to answer and would drive a firm to create a robust charging proposition . Price and value seems to be the area that may require attention , which probably leads to designing a fully formed methodology , maybe more than “ We ’ ve always done it that way ” or “ That ’ s what we did at my previous firm ”. Finally , I ’ ll throw in three takeaways to consider :
• There ’ s existing procedures and collateral to use .
• Price and value of your service may be an area to concentrate on .
• Create a logical documented proposition so , if the regulator requests it , you have it to hand .
Just visit the Business Consultancy area of the site for more .
# 05 | SUMMER 2022 | 7