Weekend Digest for Financial Planners/Advisers/Paraplanners (20th& 21st April)


Welcome to this edition of the Weekend Digest. The squabbling over SuperClean share classes continued this week, with some learned fellows suggesting it could be a breach of competition laws and certain provider, presumably after taking their own legal advice, claiming it’s not. Two lawyers, three opinions! I’m glad that clears it up for everyone.

The week ended with ratings agency Fitch stripping the UK of its AAA status, downgrading it to AA+. This comes as no shock to  anyone and as a very wise man puts it on Twitter – damage to ego, not the economy!

In case you missed the AdviserHangout earlier this week with Paul Armson, the video is live now. It’s a ‘must- see’ for every adviser, I think. Paul talked passionately about how ‘the industry’ works hard to give advisers ‘yet another product’ to talk about and takes advisers focus away from the most important part of their business – the clients!

So on that note, we thought ignore all the noise of the ‘industry’ and in this edition, we focus on how we can serve our clients better! We look at three articles, specifically relating to managing clients expectations in a soaring markets, why more disclosures may be counter-productive  and how to be a professional service firm – moving away from competing on price!


 More Disclosures Doing More Harm Than Good to the Client?

This article by Bob Clarke in AdvisorOne makes a very interesting point that every regulator and advisers should take note of; more disclosures not only often fail to help clients, it may actually decrease the qualify of the advice they receive.  This is particularly relevant in this age and time when, it seems, the regulator expects advisers to give more and more information to clients regarding the products they are buying.

One reason more information can be counter productive  is down to Knowledge Limits – most people simply do not possess the background knowledge of financial services to understand and apply much of the information that is currently disclosed to them. In other words, more information/disclosure is pointless, if clients don’t understand the implications or what to do with it. “For disclosure to work, those who get the information need to know what to do with it…And more information makes the problem worse.”

This also relates to the amount of information we put the so called ‘Client Reports‘  and we wonder why clients don’t read them!

He points out that the key to effective disclose is simplicity – giving clients important pieces of information in a way that that is easy to use. He cites the example of APR on mortgages for instance, which is one reason why people understand them and it’s one of the most competitive sectors in financial markets.

This something that should be at the back of every adviser’s mind; clients are paying us for actionable advice, not information!


Managing Client Expectations When Markets Are Soaring

This AdvisorOne article by Mike Patton examines how to manage clients’ expectation in a soaring market. He makes the point that clients are more likely to focus on absolute returns and compare the performance of their portfolio with the markets in general. This may create disappointments, especially if the client’s portfolio hasn’t performed as well.

Patton reiterates the important of educating clients on the difference between absolute return and risk-adjusted return. While they don’t necessarily need to understand Sharpe Ratio, Treynor Ratio, Jensen Ratio (Alpha) or other risk-return measures, they need to be acutely aware of investment returns as its related to risk. And not just before they invest, but also on an ongoing basis.

He also suggest advisers remind clients of  what returns they actually need to reach their goals – this is the most important factor and clients are less likely to focus on the noise of the market when they understand this.


The Service Firm Manifesto

I love this article by Robert Craven, which is essentially a list of ‘dos’ and ‘don’ts’ of successful service firms,  moving away from competing  on price. So here goes;

  1. We will not become a ‘jack of all trades and master of none.’ We are specialists, not other generalist.
  2. We are not suppliers – Suppliers are ten-a-penny; they sell and compete on price and not on quality. We are partners with our clients.
  3. We will not compete on price – being the cheapest is not our goal.
  4. We will not sell time – we will deliver a value-added service and avoid charging by the hour or by the day
  5. We will enjoy ourselves. It’s be very sad – for us and for you – not to do so!

There are 14 points on this list but I have only pick the 5 best ones, so head over there now and find out the others. Go! Now!







Abraham Okusanya
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.

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