QuilterJun 4 2019

Value of advice mapped

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Value of advice mapped

Quilter has designed a formula to demonstrate the value of advice to clients, launched to help advisers in the "perfect storm" created by requirements under the Markets in Financial Instruments Directive and political turmoil ahead of Brexit. 

The wealth management company hopes Adviser Delta will quantify the difference advice makes to clients on an annual basis, when compared with non-advised consumers.

Adviser Delta will be available to the whole adviser market, not just those within Quilter, and strives to help advisers demonstrate the value of their relationship with the client on a broader spectrum than solely the impact of their advice on investment returns. 

The formula quantifies the value of an adviser ensuring a client's assets are placed in the correct name, with the right beneficiary and most efficient tax shelter, something Quilter's research found was challenging for non-advised clients to get right. 

Quilter has also focused on the value created by advisers managing clients' inherent behavioural tendencies, such as to panic sell when markets drop, and ensuring clients "do the right things, at the right time, to realise their financial goals". 

The tool has been launched in the midst of what Quilter described as a potential "perfect storm" for the advice market with confusion surrounding the details of the UK's departure from the European Union and the relatively new requirements under Mifid II for adviser to disclose costs and charges associated with a client's investments. 

Andy Thompson, chief executive of Quilter’s advice business, said there was a "massive" advice gap in the UK but the industry struggled to explain the "substantial" difference advice can make.

He said: "We become our own worst enemies as people don’t trust the industry, are not convinced of its value, and believe they can achieve their financial goals on their own.

"Adviser Delta gives advisers the framework to put a figure on the difference they are providing to their clients. Crucially, this is about more than just the investment performance.

"It goes back to the basics of what advice offers. It’s about taxation, investment choices and how you help your clients navigate emotions, behavioural biases, and the practicalities that life throws at them."

Mr Thompson added: "When reviewing the merit of professional services, consumers naturally want to understand what are they getting for their money?

"That’s a question the financial advice industry has struggled to answer because much of what we offer is intangible. This formula dramatically changes that conversation."

Quilter identified characteristics of a typical unadvised portfolio saw investors favour a UK bias, with a lack of asset allocation and purchase of "attention-grabbing" assets, all of which the wealth manager found risked decreasing returns and increasing risk.