Three-quarters of financial advisers rely on portfolio performance to evidence value, failing to measure the true value of advice, according to a report by NextWealth.
The research firm said that advisers are relying too heavily on performance data to evidence value. This comes as value is one of the four pillars of the Consumer Duty – where the Financial Conduct Authority (FCA) wants to see that consumers receive fair value.
NextWealth asked 427 financial advisers what they document to evidence value to clients and 73% said performance of a portfolio.
This was followed by milestones against client goals and objectives (42%), client satisfaction via survey (34%) and time spent (26%).
Heather Hopkins, managing director of NextWealth, said: “Relying on performance data to evidence value is incredibly risky, particularly when markets are so volatile. Not only does it put too much emphasis on market conditions, it fails to measure the planning and emotional support that clients value most from working with a financial adviser.
“Advisers struggle with the intangible nature of documenting value. Performance against benchmarks is easy to collate and report, but it fails to assess the true value of financial planning and advice.”
