Advisers need a process for change

In a study by Platforum, as reported in Portfolio Adviser recently, it found that advisers are reluctant to change the arrangements they have with DFMs and investment managers.

It could be argued that perhaps advisers are satisfied with the service they receive so see no need to change. The issue is that, if alternatives are never considered, how do advisers actually know they are getting the best for their clients as well as their own businesses? Suitability is an ongoing function that advisers need to be cognisant of and the rules and regulations are clear as to how this should be addressed from an adviser’s perspective, both in relation to the suitability of the provider as well as the suitability of the specific investment.

Over the course of my career I’ve worked for some large corporations. When buying services, the policy at some was to have an automatic review of external suppliers every three years. This meant that there was no room for complacency. Service levels, price and, importantly, value for money were all reviewed against the incumbent and at least two other firms who were invited to tender.

The process was fairly time-consuming and regarded by both sides as a bit of a pain in the proverbial, but it was effective in ensuring no-one was resting on their laurels and that the firm was getting the best for its stake-holders.

The key element in these reviews was to have a clear list of objectives. The cheapest often was not the best value in terms of overall service levels and quality. The sales pitch was just the starting point and thorough due diligence was required to be sure the firms could deliver exactly what they were promising. One of the most effective ways to test this was to talk to existing clients to get their candid appraisal.

Advisers who adopt such a policy may find they are surprised by what’s out there. If they find their existing relationship suits them best, all well and good. I’m sure the regulator, as well as existing clients, would take comfort that a process was in place.