How to measure your value

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Something that’s been ‘kicking around’ the profession for a long time is the question of how to measure your value.

It’s not as simple as looking at investment returns, which can’t measure the emotional value you’re adding, but you need to have some sort of tangible proof that you are helping clients with their financial goals.

Sean Graham, consultant from Assured Support, raised concerns over recent claims that advice clients outperformed those without advice in the market, and says these sorts of results will always depend on the sample. “The PJC Committee probably would’ve found a great number of clients that would’ve been better without advice,” he says. “This obsession with returns is never going to be a consistent way of assessing your values success.”

While this might be important to some clients, Graham says others are looking for security and emotional stability, and the only way to measure value is by consumer response. “Do they feel better about their circumstances? As a consequence of your advice, has their life improved? Have you contributed to their level of financial literacy? They’re all things a consumer can value”

According to Simon Harris, head of Guardian Advice, there are three ways that advisers can measure their value:

  1. The first is outcome-based. This could be in the form of tax saved, savings objectives achieved and retirement savings accrued.
  2. Clients value the experience, the guidance and the coaching/mentoring that advisers provide. Harris says you can measure this by the cost that the client is paying the adviser.
  3. The last measure is a test, the ‘sleep test’. Often the real value of risk advice is only measured when there is a pay-out, but Harris asks, “Can they sleep at night? Do they have the promise that their family is protected?”

Different clients will place emphasis on different values, depending on personal circumstances and backgrounds – education, family etc. That’s why understanding the individual needs of the client is so important to demonstrate your value effectively.

Harris and his team will help advisers to demonstrate the value of their advice in line with FOFA’s requirements around ‘Best Interest Duty’ at workshops from 5 June to 24 June. Risk advice expert Chris Unwin will also show advisers how to demonstrate the value of their risk advice, ensuring advisers can run a sustainable business in a post-FoFA world.

“Under FOFA, upfront and ongoing fee disclosure will become even more transparent to consumers, and advisers will need to prove the value of their advice and that it is worth paying for,” says Harris. “Some do it amazingly well, have been for years. For others it is a big change and they need support.

  • Stephen on 28/05/2013 10:55:05 AM

    I read this article with great interest especially "Do they (the client) feel better about their circumstance?" How can an investment advisor put forward an option regarding selling underperforming shares (at the bottom of the market but with divided yields above 6%) that will eventually rise so that the client can buy the units in the fund that their company owns where the management fees are so large that it would be unlikely to get a return of consequence? I do think that advisors (financial or investment) need to fully understand what is in the Part 7.7A of Corporations Act especially section 961E: What would reasonably be regarded as in the best interests of the client? I understand that the average person does not know how to interpret the relevant legislation but it does make you wonder how many advisors fully appreciate what they are doing.

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