Why no one in advice benefits from social media ‘mudslinging’
'It seems to me that there is room for all forms of advice'
There’s a role for all types of advisers as long as advice is the product, writes Roger Brosch
However, if you were to read the comment sections in the financial trade press or, perhaps unwisely in a moment of boredom, ventured onto X (formerly Twitter), you'd be mistaken for thinking that we are a profession perpetually at loggerheads because everyone (else) seems to be doing it ‘wrong'.
While there are indeed various types of professional financial advice, it often seems like the loudest voices claim theirs is the only ‘good' type. This insinuation implies that anyone with a different business model should be questioned about their motives.
It seems to me that there is room for all forms of advice; tied, restricted, vertically integrated, independent-whole of market, and digital (robo)-advice. Each has the ability to deliver positive outcomes and fair value for clients when appropriately tailored to their target markets.
Advice is the product
Perhaps, instead of channelling our frustration elsewhere, we should reconsider the wholly misleading term ‘distributor'. To me, the real thing that advisers ‘distribute' is advice; and that is what clients really value. It just happens that as businesses we have each chosen different paths for what happens after that advice has been given.
After careful consideration, we felt vertically integrating would provide us with an enhanced level of ongoing control over the assets under our advice, which we feel strongly is in our clients' best interests. Others have a different perspective on what's best for their clients, and that's perfectly fine. You can only do what you believe is right for the clients you serve.
For us, this means being able to design and define the investment mandates we use, which we feel means outcomes that are better connected and aligned with the advice that we are giving. Structuring the advice in a certain way and then handing responsibility over to a third party to deliver to that structure didn't feel right for us. We wanted to take full responsibility for the client outcome and for us, designing and contributing to the governance of the mandate provides more certainty of achieving the required outcome. This approach, however, may not be right for others.
We value the additional control over what happens next, and we believe maintaining the connection between advice and asset management reduces overall risk. This requires operating separated functions within the business, each one integrated and yet with distinct roles and responsibilities. We feel that this greater connection and integration, gives us a greater chance of achieving more predictable outcomes.
If you're able to scale, you can start to influence price, which is another key consideration, we have been able to regularly reduce the cost to our clients by leveraging this scale on their behalf.
However, others have chosen different ways to structure their business and that of course can work too. Whatever the approach, the most important thing is that the client sits at the heart of every step and stage of the process. Perhaps going forward, we should have a little more faith in each other, as we all know how to achieve the best outcomes for our respective clients.
Regardless of your advice model, I can confidently say that no client outcome has ever been improved by taking to social media to sling mud.
Roger Brosch is chief executive at Foster Denovo Group
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