By Carl Roberts
I read an article recently from Brett Davidson of FP Advance about how he is seeing a trend in the marketplace to move back to unbundled advice.
This really rang true with me. Unbundled advice is becoming increasingly popular – but what does it mean?
For some time, particularly since the Retail Distribution Review, we advisers have been packaging up our services into something valuable a client will want to pay for year in year out.
This is bundled advice: do the initial plan, implement recommendations, and then review on an ongoing basis (which includes a number of services). This model makes sense from a business perspective, as there's a lot of value in recurring income.
Unbundled advice is when each service is ‘sold' separately. For example, a client may need a financial plan but then doesn't want to pay for ongoing reviews. I believe there are two reasons more people will want an ‘ad-hoc' advice relationship going forward.
People are comfortable doing a lot of their own research. There's so much information out there that we can learn anything if we have the time and inclination to do so.
DIY researchers don't see the value in a bundled advice service. They want to pick and choose the bits they don't have the time or skill to do themselves.
I think most advisers already realise that advising on investment funds doesn't provide optimum value and is not our unique skill. Robo-advice is rubbish from an advice point of view, but the technology to provide the underlying investment models is good and frees up a lot of our time to do the advice bit.
I wrote recently about how we as advisers need to provide a different service model and I see dealing with some clients on a one-off basis as a part of that.
Just recently, I met with a new client who wanted advice on accessing his tax-free lump from a pension so he could invest in his business. He had no plans to retire, was leaving the rest of the pensions invested in a managed fund and was on top of his future plans.
He didn't want a financial plan, he didn't want a new investment strategy, just purely help with achieving his objective of investing in his business.
Luckily, he came to us for the advice as we discovered his pension had a valuable guaranteed minimum pension so an alternative solution was required. This client was very happy with the pension review, paid a fixed fee, and I'm sure will come back to us when he wants his next bit of advice.
This is where charging fixed fees does help us as we don't need to go into any advice relationship with a focus on the money. We can focus purely on the client's needs and charge an appropriate fee for the work.
Rather than worrying about service models and packaged solutions, let's just focus on the advice. What does the client actually want? That's the question we should be asking.
Carl Roberts is a Managing Director and Chartered Financial Planner at RTS Financial Planning. Read his full profile here.
