David White: What does ‘good’ ongoing service look like?

David White, head of Fundsnetwork, argues advisers can learn from private banks and wealth managers when it comes to client reviews.

To be ready for the post-RDR world, advisers will need to make some important choices regarding key aspects of how they operate their business. With this in mind, the FSA deserves credit for the clarity of its published advice on what types of services advisers will need to offer to clients to justify charging them an ongoing fee.

We now know a clearly-defined service (say an investment review conducted up to once a year) will be acceptable even if the trigger for the review is controlled by the client rather than the adviser. Hopefully, this will now end the debate around whether – and the extent to which – clients must be chased regarding annual or other reviews.

Go the extra mile

Still, one important question we need the answer to is what ‘good ongoing service’ constitutes. Advisers debating this issue might want to consider the approach pioneered by private banks and wealth managers – namely, detailed investment commentary and portfolio review.

This service involves going substantially beyond what summary statements and portfolio ‘x-rays’ can deliver. Instead, it provides a more comprehensive and meaningful annual report to clients on portfolio performance, including investment and fund level commentaries.

In many cases, a well-presented reporting service of this type that is clearly owned and produced by the adviser firm could constitute the core of an attractive and compelling ongoing service. A big advantage of this type of proposition is that it can be relatively inexpensive to deliver on a per client basis, since much of the content can easily be sourced from third parties.

The key point here then is that a fairly wide-ranging service can be delivered to clients in this way, and crucially, on an ongoing basis.

Managing portfolios

Another key choice for advisers in the post-RDR world will be the question of how they go about making asset allocation choices for their clients. Some firms will see this as being a central part of their remit – in this case, the classic approach of client specific portfolios or model portfolios will be the likely choice.

If advisers do not have such a strong preference for keeping client asset allocation decisions in-house, then ‘outsourcing’ via multi-manager or discretionary solutions may be the best answer.

For some, this outsourced approach might raise some existential doubts about whether they are delivering good value given that the multi-manager or discretionary solution provider will create an extra layer of expense. However, anyone thinking along these lines should probably also bear in mind the potential benefits of such an approach, such as the freeing up of time for other areas and possibly improved asset allocations.

The importance of choice

The FSA’s advice on reviews should help many advisers figure out what kind of service proposition they would like to provide in the post-RDR world. However, there remains no single ‘right’ answer regarding adviser investment propositions.

This is why it is essential for platforms to support the widest possible range of investment approaches, so they provide advisers with ‘choice’ and not ‘direction’.