The decision to take on a new client has never been more important than right now. Consumer Duty places a requirement on firms to ensure they are providing services which not only offer fair value to clients but help them to pursue their financial objectives.
We are at a turning point in financial advice. This is the end of generic, catch-all service propositions. Going forwards, services must provide value to every client and with this brings a challenge for advisers. As it’s not practical to have a service proposition for every type of client, advisers are going to have to be clear on the type of clients they can provide value to. What could be more problematic is what to do with existing clients who don’t fit the mould.
In this article, we explore why a well defined proposition will attract the right clients and make life easier for the adviser. We’ll also consider how to create fair value service models and how to have difficult conversations with clients who don’t make the cut.
One size doesn’t fit all
Many advice firms created their service proposition as a “catch all”. Designed to fulfil the needs of most clients, accepting that not everyone will need all or value all the elements.
Under Consumer Duty, providing fair value creates an expectation that clients must use and value the features they are paying for. Quarterly updates might be valuable to some but of little or no value to others. Going forwards, clients that don’t value an element of the service proposition shouldn’t be paying for it.
This is not a problem if an adviser’s clients are relatively similar in their requirements. However, it creates an issue for advisers with diverse client banks.
The exception is if the services not being used carry no cost (i.e. the client isn’t paying for them). This however brings further question over which elements of a service proposition are paid for and which are “included for free”.
The power of clarity
In an era where clients have diverse needs and expectations, advisers need to be very clear on who their proposition is designed to serve.
But to create a clear and well defined service proposition, advisers need to first establish who their ideal clients are and what they want. By diving deep into the demographics, psychographics (traits such as values, desires, interests, and lifestyle choices), and financial goals of their ideal clients, firms can tailor their advice, service, communication, and pricing models to meet their unique needs. The more aligned the service can be to the client’s requirements, the more value they’ll get from it.
Once advice and service models have been created for the firm’s target clients, advisers should be clear on who they serve. Staying true to this should ensure new clients align to the target market. By focusing resources, expertise, and energy, advisers can deliver exceptional value and outcomes for the client segments they have chosen to serve.
Time to say goodbye
It’s often easier to say no to new clients than it is to part ways with existing ones, yet say goodbye you must.
A firm’s advice and service propositions have been created and tested for value against the needs of its target clients. As a rule, if a client doesn’t fit the target demographic, it’s difficult to evidence that they’re receiving fair value and therefore they shouldn’t be a client anymore.
There will always be exceptions to this rule. If you have a client where it’s commercially variable to do so, you may decide to make a unique service proposition just for them. However, each new service proposition must undergo a value assessment so be mindful of the number of exceptions you create.
Here are four things you can do to get your business ready for Price and Value:
- Define your ideal client profile
Outline your ideal client profile. Identify the characteristics, needs, and goals of the clients you can best serve. This clarity will enable you to develop targeted marketing strategies, tailor your services, and create pricing models that resonate with your ideal clients.
- Conduct a pricing review
Test your firm’s current pricing model and assess its alignment with the value delivered and the service proposition. Consider the services provided, the expertise offered, and the unique value proposition of your firm. Adjust the pricing structure to ensure it reflects the value clients receive and is easy to explain. Transparent and fair pricing models build trust and help clients understand the value they are receiving.
- Say goodbye to misaligned clients
When clients don’t fit your target market, it’s important to have a strategy for parting ways amicably. Assess client relationships based on alignment with your target market and value proposition. Communicate openly, explaining the mismatch and suggesting alternative solutions, which could be a referral to a more suitable adviser.
- Seek client feedback
Value is personal. Actively seek feedback from clients to understand which areas of your service they value and any suggestions they have for improvements. Create avenues for open communication, such as the Elevation surveys, to gather valuable insights. Use this feedback to refine services, enhance the client experience, and continuously demonstrate value for money. Listening to clients and acting on their feedback shows that their opinions matter and strengthens the client-adviser relationship.
Consumer Duty brings an end to “catch all” propositions. To thrive, advisers will need to understand their target audience and deliver a personalised, relevant service to deliver value for money.
By taking actionable steps, such as defining your ideal client profile, reviewing your pricing, saying goodbye to misaligned clients, and seeking feedback, you can elevate your business and provide a great client experience.
Being clear on who you serve allows you to focus on delivering exceptional value, building trust, and cultivating long-lasting relationships. Embrace clarity of proposition, drive results, and reap the rewards in this new era of financial advice.