Vanguard calculates value of financial advice

Vanguard calculates value of financial advice

The value of financial advice is calculated as 3 per cent above what a client could achieve if they opt against the professional planning route, according to the head of retail sales at Vanguard.

Dissecting the true value of advice to delegates at the final day of the Institute of Financial Planning conference yesterday (7 October), Vanguard’s Neil Cowell said the figure might not be achievable every year and by all clients but could double as a result of a sole adviser intervention.

He added advisers add value for their clients in a number of key areas including asset allocation, risk management, costs, tax planning and when it comes to investment for income and total return.

However, Mr Cowell said the single biggest area where advisers can showcase their worth is in behavioural finance: the ability to prevent clients from making common investment mistakes

Speaking in Newport, South Wales, Mr Cowell said: “Left to their own devices, clients fall foul time and time again. People chase performance even though it rarely lasts. It is alarming but it is true.

“Not only do they chase, but they get there too late – typically between 1.5 per cent and 2 per cent too late. Financial advisers have the opportunity to be that emotional circuit breaker.”

At another session Andy Zanelli, head of retirement planning for Axa Wealth, explored ways in which advisers could help their clients reduce their tax bills using a strategic wrapper allocation and typical investment vehicles.

He said: “There is huge flexibility now and that has changed the way in which we need to give advice to clients who have always want to maximise their tax exemptions.”

In one of the final sessions of the day, Philippa Hann, partner at Clarke Wilmott LLP, spoke about the evolution of Fintech and the challenges it presents to the regulator.

She said: “They [the FCA] don’t know where that innovation [in fintech] is going to go and how it going to effect the investor and therefore what steps they need to take to protect the investor.”

Commenting on robo-advisers, Ms Hann added: “If you are giving advice over the internet there is no difference - even in simplified advice.

“The requirements are the same in terms of suitability. If you giving advice and recommend somebody to take certain steps then the full force of the financial markets act applies.”

Her comments come after last week Harriet Baldwin, economic secretary to the Treasury, said a start-up that wanted to enter the automated advice space was told it would have to ask consumers 247 questions to comply with regulation.

Speaking at the Financial Conduct Authority’s ‘robo-advice’ conference, Ms Baldwin said a ‘sandbox’ could be created as a “safer space” for firms to experiment with ideas for consumers without the full burden of regulation.

“Once this is up and running it could help test potential ‘robo-advice’ models,” she added.

Ms Baldwin re-iterated the government’s desire to make the statutory environment appropriate, “knocking down barriers to entry”, citing one start-up that wanted to enter the advice market and was told its automated service would have to ask consumers 247 questions to comply with existing regulation.