Vanguard financial advice service…should advisers be worried?

The launch of the Vanguard Financial Advice Service was widely reported recently, with some commentators hailing it as a way to unlock financial advice for people who struggle to find a financial adviser able to take them on…or who are unable or unwilling to pay for a full advice service.

How useful will it actually be to people who don’t have a large amount of assets to invest? The entry-level is £50,000 and it’s only with £100,000 or more that investors can gain access to the Vanguard financial planning team via telephone and video call. Anyone with £750,000 or more will get their own dedicated financial planner.

False economy?

For those with higher assets, in particular, the offering has its challenges. Investors will only be able to access a restrictive offering based solely on Vanguard funds, so the 0.5% charge for investment advice for anyone with more than £1 million could prove to be a false economy if they would benefit from an investment offering that Vanguard can’t provide.

For the majority of financial planners who have relatively wealthy investors on their books, I doubt they will lose much sleep over this launch. They offer far more than simply investment advice and enjoy a position of trust with their clients that transcends a simple cost equation. The most successful ones are also likely to have the right value proposition, partnerships and tech in place.

Major marketing push

But there are advisers out there who will be affected. As well as Vanguard, we are seeing a number of other investment providers putting significant amounts of money behind marketing, including TV advertising, aimed at getting investors to go directly to them without the need for a financial adviser.

This onslaught of marketing will if carried out effectively, lure some investors to end their relationships with advisers, especially if they perceive they are not getting any value beyond choosing of a non-tailored investment portfolio.

Value versus cost

But the advisers most at risk are those who have focused on solely low-cost investing with their clients. With the new Vanguard service promoting cheapness over all else, unless those advisers are demonstrating added value across other services, they may find their clients challenge them to match the Vanguard costs, which many will be unwilling (and unable) to do.

With evidencing added value likely to become an even greater part of the client relationship for advisers, perhaps this is a good time to flag our white paper: The Insider’s Guide to the Value of Advice.

It’s free to download and offers insights from industry studies that quantify adviser value-add; views from over 200 financial advisers on how they are currently articulating the value of their offering to their clients; a roadmap of skills and attributes that advisers agree ‘add value’ to their clients and tools to analyse what clients believe about the value of advice.

The paper has been downloaded by over 1000 advisers and featured extensively in the industry press, so there’s obviously a demand for this type of content.

With the Vanguard launch being described as ‘a gamechanger’ and ‘disruptor’ by some industry commentators, there’s never been a better time for advisers to promote the value of their services. There’s no time to waste.