The meaning of value 2024

Welcome, everybody, to our webinar looking at the meaning of value. My name is Jamie Jenkins, director of policy at Royal London. And I'm joined by Mike Barrett from Lang Cat, who have carried out the research on our behalf. This is the second year that we have looked at value, and we're starting to see some interesting trends develop. We looked at the views of advisers, but also consumers and including those who are advice or clients of advisers.

With no further ado, I'll hand over to Mike, first of all, to run through the research, and then we'll pick up some observations after that. Mike, over to you.

Thanks, Jamie. Going to dive straight into the detail after the introduction. Just a few little bits of housekeeping before we get into the main event.

So the consumer research, which we'll talk through, as you can see on the screen here, is conducted on our behalf by Opinium during the last few weeks of September, and we ended up with a representative sample of the UK population and throughout various stages of our research will either refer to that full sample of the UK population, or we also might and will dive into a subset of the population who have paid for advice.

The adviser research was conducted by myself and my colleagues at the Lang Cat again in September using our research panel. Any advisers who completed our survey who are viewing this webinar, as always, we’re extraordinarily grateful for the time they spent completing the survey. Not only did we do our survey through our adviser panel, but we also conducted interviews with about a dozen firms as of various shapes and sizes to kind of talk through some of the some of the themes that needed a little bit more in-depth discussion and again, we’ll share the results of those discussions as we go through.

So, what we're going to do for, this webinar is to look at the research really in three parts. It's a fairly lengthy study. And as Jamie mentioned, this is the second year we've conducted this research on behalf of Royal London now. So even in the time that we've got allotted today, we're only really going to kind of skim through some of the high level findings. We’d really encourage everyone on the webinar to download the report for free off the Royal London website. And obviously to give it a read. And we would certainly value any feedback and comments which you might have. And if there are any other areas which you would want to find out about, then chances are we've probably got the data set in the background as well. So please do give us a shout if there's anything which we don't cover.

But for the webinar today, as I said, I want to focus really on three areas. So firstly, we got to look at what consumers value, what's in the mind of somebody when they're about to purchase a product or service and how are they going to determine whether that product or service represents good or decent value for money?

We're going to then take our second part of this webinar; we'll look at specifically the advice sector. So, when consumers are paying for advice, whether they value advice and whether they think that's good value or not, whether they're comfortable with the overall experience, a little bit of a spoiler for that one. That's quite positive, I think, for the advice profession. So certainly, all hang on for that with that part as well. The final part, we will look again specifically at what's happening within advice businesses. And we're going to just inevitably spend a little bit of time talking about consumer duty and in particular, the requirement for all firms to evidence the, their services, representing fair value.

So, we're going to talk about how advice firms are approaching that, some of the challenges that they're facing to do that in a time effective manner, that is going to kind of satisfy the needs of the regulator and particularly, an increasingly data driven regulator. So, with no more ado, let's go straight into the detail and into the presentation.

So firstly, we started off with some open questions to our consumer research and wanting to understand what value represents to consumers. We did this in a little bit more depth. I think it's fair to say a year ago on the first wave of the research, because we wanted to kind of, 12 months ago really understand this, this process that consumers go through when considering buying a product or service.

I think everybody knows that value is subjective. Everybody has their own opinion as to what represents good value for a product or service. And it's also variable in kind of the context of a situation for different products and services, which you might be buying. I might drive a cheap car to Waitrose to going to do our shopping, for example. You'll make those different judgments again at different stages of your life. And you might well decide that actually you're going to shop somewhere a little bit, less expensive, than Waitrose. It's subjective, it's in the context of the product or service that you're, buying. But crucially, it's the person. It's the individual who is purchasing that product and services who will decide whether something represents fair value or not.

You can't tell somebody that this is good value, honest. They've got to decide for that themselves throughout the process. So, research, we started off with fairly open questions to consumers and I guess, to give you a bit of background into the research methodology here, at this stage, we did not have any prompted responses to the consumer panel at all.

Simply an open question. What has value been for you? A value for money was the initial response. But it's about this relationship between what something is worth the price of you're paying for it and the quality of the product which you're going to be getting. It's worth noting right in the bottom there, we've got almost 10% of the respondents said they didn't know, which, again, from a research perspective, that's quite a high proportion but in terms of results around that, you'd expect to get probably 2 or 3% on, on a survey, say don't know. But this is people who are genuinely saying, yeah, I don't know. I don't really understand what value actually is for that. So, it's quite confusing for consumers to understand in some respects. But again, it is very much about this relationship between the quality of the product, what it is you're going to get, what it does for your quality of life or whatever that might be, and the price which you're going to be paying for the product and service.

We want you to understand also that, kind of moving stuff towards the advice sector. What consumers value from an adviser is a range of things that come through around this. So, these responses that consumers gave us here, these were prompted, so we gave them a list of answers to choose from. And they kind of selected the ones that they thought were important to them. And you can then see the relative weightings around this.

Throughout the research, where possible, we have identified, gender splits. And also in some cases age bracket splits as well. It's possible for us to do that for all the research, but actually we've already shown it where there's actually some differences to talk around here. Broadly speaking, where we do look at the different genders there are some noticeable splits here and some splits which I think it's nuanced that that kind of subtle in some respects, but they are they're noticeable enough.

And I think advisers should probably start to kind of just think about how they account for this in terms of their client communications. We'll look at a number of aspects as we go through around this, but broadly speaking, the male side of a species is a little bit more, kind of tuned into some of the harder measures, of advice.

So particularly investment performance, making sure that the firm has good skills and knowledge that that type of thing. Whereas for females, the issue of trust and good communication, explaining stuff in a clear manner to them, making sure that you actually feel that this is the right solution for me, that becomes much, much more important as well for, for females.

We want to ask advisers a similar question. So, this is starting to compare and contrast the adviser and consumer responses to that same question. As we saw on a previous slide, the consumer response is here where we're prompted, whereas the adviser one, we're a little bit more unprompted, a bit of an open question here.

And you can see this starting to kind of get a picture of, a little bit of a kind of a misalignment as we go further along the chart. So don't be too alarmed about the difference in weightings here, as I said, that that's more of a reflection of how the questions were asked. But when we ask advises what is important? What do you think is important to customers who are paid you for advice? It focuses on kind of a softer measures, peace of mind, taking time to understand circumstances. Making sure that, you're aligned to the goals that that type of thing. Whereas the consumer responses on the right-hand side have a little bit more kind of a preference around some of the harder measures they've saved to be money in particular, if they have a good reputation.

We'll talk about kind of some of these harder measurers, particularly investment performance as we go through in a moment. But it's clear that, both advisers and consumers are in agreement that some of the softer measures, some of the more tangible benefits of advice, such as peace of mind, financial resilience, etc., are important to them. The research shows that consumers have to ascribe a little bit more value, to things like investment performance and actually making money, than advisers might in some cases believe.

To look at that from another way, we wanted to kind of explore this relationship, this balance between tangible and intangible or benefits. So the hard kind of, yes, your portfolio has gone up, by X% versus kind of, I guess, the softer feely stuff around financial well-being, financial resilience, helping the wider family, helping you to achieve your goals, etc... So, we asked consumers and advisers to kind of rank where they think they sit, between the two.

And again, which kind of highlights a slight misalignment that consumers had started to just say actually, yeah, we're a little bit more kind of attuned into the tangible benefits. I want to make sure that my money is growing, and I want to make sure that we're getting good investment returns as well as all of the other things which we've which we've just talked about.

And that comes down to investment performance, which is really kind of the crucial part here. And again, an area which advisers perhaps could think about, kind of making sure that they're redressing the balance, getting the balance right in terms of their customer communications here. So, when we ask advisers to how much of an impact does investment performance have on the current consumer perception of value, 24% of our respondents said that it had a big impact. However, 45% of our consumer responses said that it's the most important factor for them. These are consumers who have paid for a for advice as well. That rises up as you can see, they are quite a noticeable gender difference here. So, 50% of males are saying it's the most important thing for them. And of less importance held on for the female side of things.

But we've we spoke to quite a few advisers around this and it's a really interesting topic. And as much as I think as much as advisers will quite rightly obviously say to their clients that's investment performance can't be predicted, exactly, can't be controlled directly by the advice firm. The research shows that consumers still think it's a big part of what they're paying for.

One adviser we spoke to about this was saying how they focus a lot more on investment performance and kind of talking about it throughout these initial conversations with the client said the first kind of onboarding exercises had the first annual review as well. And in particular, if the investment performance, for the first review isn’t where they would like it to be, it becomes less and less of a problem. The more immersed into the process, the clients become and the more they understand. Firstly, again, they start to appreciate at that point that investments can’t be predicted. There will be good years, there will be not so good years, but also long term performance starts to actually become hopefully pretty decent as well. But that particular adviser was saying they just believe that maybe just been a little bit too much of a drift in some cases towards the intangible benefits of advice. And just need to redress the balance slightly and not lose sight of the fact that clients ultimately want to get a good return on their money, and they want to make sure that their investments are, indeed performing.

Final bit around this, we want to understand what consumers value from a product provider. So again, reminding ourselves that these value judgments that all of us make as consumers, as individuals, are subjective, but they're also in, in context. So this highlights that actually, consumers will decide whether a provider is delivering value based on a pretty different set of criteria actually to the advised research we saw a moment ago. So, it may provide a side, it's very much about good service. It's about a trust and kind of a reputation that particular provider has. It's somebody who I know they're going to be responsive to my needs. And I can trust them to, to look after my money. But again, investment returns kind of comes in around that as well. So, for the investment focused providers, it's going to be a good service. And I want to feel like I could trust you. But you've still got to be moving my investment team in the right direction.

Final bit around this, we wanted to kind of explore on the product side, this relationship between cost and features. It's very small writing on this chart. So, apologies if you're squinting at the screen at this moment, but it’s in much more detail on the report. But what this is showing is again, this contextual decision that people make around products, around financial services products on the right-hand side here, the products which your consumers are most likely to be more price sensitive, if they wanted to go for the cheapest ones, things like the day-to-day household financial products such as current accounts, savings, ISIS type of thing. But type of products which are kind of fairly frequent purchases which you will interact with quite possibly several times a day. Whereas the longer-term savings and investment products, the infrequent maybe even once in a lifetime purchase such as critical illness cover, workplace pensions it's tends to be much more feature driven, and it's a more considered purchase rather than just, gave you the cheapest product that's available.

Jamie, any comments on that particular section?

Thank you Mike. That's really interesting. I mean, it's notable that things like good service and trust at the top of the list for what people value and providers, I guess, speaking to the point that many people feel that they don't have enough trust and the service isn't good enough. And I think that's a fair reflection of, most people's experience across the piece. So, some work to do there. I think your point about subjectivity, the idea that, you know, that value generally is a very subjective idea. People's views are different and very personal, depending on their perspective and even the sort of slight nuances between what value for money is versus what it's worth.

And there is a nuance in there. We've seen from probing that question before, that the sort of perceptions of what those things mean are interesting. Some people look at it as good value as getting a great deal, and what it's worth is getting a fair. I think it's very interesting that comes through. And of course, that plays into the whole advice proposition, the differences there between males and females and the sort of tangible elements that we've seen from males, and a valuing things like investment performance, which, again, is subjective. I mean, is that outperformance, is it relative performance? Is it surprisingly good performance is, you know, what does that mean? And what does that mean in a given year, given market conditions, I think is interesting. And then females perhaps valuing, some of their, I would argue, potentially more important or more substantial elements such as, trust to the place and the adviser and indeed, the communications and how much they make sense to them as an individual, which you might argue is more relevant and more within the control of the advice proposition.

I suppose my overriding sentiment here is that this points to areas the differences between male and female on certain aspects or people's, definition of value. And indeed, what they value the most or least ultimately, advisers know their own clients and their own business and their own proposition much better than anything we can do from this research.

So, it's pointing to particular areas that advisers will no doubt then want to pick up on. But I'll stop there and let you move on. Mike.

So, section two is now looking at, the question of whether consumers actually value the advice which they’ve been paying for. So all of a consumer research we're about to talk through here, are individuals who have paid for advice in the last couple of years and we've tried to get a representative sample within that. But there is that nuance there that they are real life advised customers. I think the good news around all of this is that as we work through, we can see that pretty much across the board. It's an increasingly strong message for the advice profession.

We do a lot of work in the space at the Lang Cat. Both this research, the research we did last year on behalf of Royal London, some of the work we've done on the advice cap, for example. And every time we ask various versions of these questions around ‘do consumers value advice?’ The answers are extraordinarily positive. So, we've now got two sets of data around this. And even in 2023, the data set for this particular question, do you value advice was as pretty positive. I think from memory it was about 54% of consumers were seven, and above on this particular question, that's risen to 66% over two thirds of consumers on a seven or above rating, which for Net Promoter Score type rating is very, very positive is there's an awful lot of sectors and professions which would which would absolutely love to have this type of type of endorsement from their customers.

So, the headline here, it's really quite positive and it's a message which I certainly think really does deserve to be understood by the population more widely. I think that advice is increasingly a profession now rather than a focus for sales led culture that historically perhaps used to be, and that people who are fortunate enough to be paying for advice, certainly believe it is a value.

But we are starting to get a lot more detailed as well. As we said, there's no one particular thing which is on the consumers mind when they're making they face value judgment. So, there's a lot of aspects which they're considering around their service. There's a lot of underlying metrics which we've been tracking as well as that kind of positive headline figure.

And again, the positivity story screen through all of its particulars side of things as well. So, the 2024 figures you can see on every single underlying metrics we've seen an increase. So things such as the advice are in my best interest to have relevant skills and knowledge this point around maximising returns, investment performance. Again, we've just talked about how important that is to some consumers. But even that that’s having a noticeable increase in kind of the sentiment that, consumers place around that as well. So the headline level, is really positive increase in consumer satisfaction and everything, which kind of contributes to that as well is moving, in the right direction.

Expectations being met is another way which we can look around this. So again, these are consumers who have paid for advice in the last two years. So just wanted to understand did the overall experience, did what you think you were going to get out of it? Has that expectation to be met and what have we got there? About 75%, either went beyond or met my expectations as well. So, we are very, very positive side, endorsement for that particular angle.

Fees obviously form part of the judgment as well. And it's certainly something where that half of the value judgments, what it is you're going to be getting and whether that's going to be of benefit alongside how much is going to be pay, how much you're paying for that.

So, we want you to understand, do you actually understand the fees which you are paying? Are you actually comfortable with the level of fees which you are paying? On the latter, the satisfaction is quite high. Consumers are comfortable with the fees that they're having. And you can see this a reasonably strong figure here for the question around understanding about fees an average of 7.3 around that.

But I think if I was being, a critical friend of the advice profession, that's maybe one area where there's perhaps just a little bit of room for improvement. You could kind of in, overly simplistic. Well, perhaps, aim for that to be ten out of ten, every single customer is saying that they understand the fees they're paying and that they're comfortable for that for that as well.

You can see its still pretty strong area. And that's yeah, very few people are kind of saying they don't understand it at all or have awarded it a really low mark around that as well. But again, I think that, is one area where there's just perhaps a little bit room for, for improvement. Jamie, anything to add or based kind of this point around advice and the value that advisers are adding to their clients.

Thanks, Mike. I mean, look, it's a really notable shift in, the perception of value from advice. And I guess it could be down to a number of things. I think most of that is down to, you know, the sheer value that advisers are offering and particularly difficult times in recent years. And, obviously, the volatility we've seen in markets and the pressures around the cost of living, which have not been, you know, confined to other parts of the population, includes advisers’ clients as well. There's all of that, you know, you might be generous and say, well, the consumer duty, has also come in and been embedded during this period, which of course, applies to all of us in the world of regulated financial services. And certainly, advisers have been making changes to their business in light of some of the elements of the consumer duty and the loop across to value.

Generally. So maybe there is something in the consumer duty, there, but certainly a notable shift to the positive in terms of the value that consumers clients place on advice itself. I mean, I still think we see some, you know, evidently there's some scepticism from those who are not receiving advice as to its relative value, but those who do receive advice. Clearly, right across the piece of all the measures that we looked at in this study, year on year, has shown a positive increase, which is really good on the point about fees. I mean, it's an interesting one, isn't it? I wonder you mentioned there's room for improvement. Maybe that's true. Maybe we've reached an optimum point where, you know, people are at the sort of point where they don't need any further understanding of fees. Maybe they feel they understand fees sufficiently. I don't know, it's an interesting one, perhaps one that we should probe further in future studies. But again, quite a lot of work has been done either on changing fees or fee structures or indeed around the disclosure of those, so, you know, maybe we are seeing that gradual increase in people's understanding as a result.

One way or another, it's, it's a good result and reflects well on advice businesses. But Mike, back to you.

The final part of the of the webinar. Now again leading to some of the consumer duty stuff. It's almost inevitable that, despite us wanting to kind of take this sort of research a little bit broader than just consumer duty. The question of value and evidencing fair value is a big theme, a big part of, what all firms need to do to follow the rules set in, introduced by the duty of just over a year or so now.

So, we wanted to understand how advisers are approaching this. They're perhaps in their kind of second wave now with evidencing fair value.

So, within the adviser survey we asked firms what sort of data they're going to be collecting and the processes which they're going through. And you can see on the screen here, we're setting out kind of various data items and whether they're measured formally as part of the fair value assessments, measuring it but not including as fair value assessments or just indeed not measuring it at all.

These data items are not something which we just kind of plucked out of thin air. They're actually taken from the FCA's own good practice guidance, which was issued, as part of the consumer duty implementation period. And there the suggested data that firms might want to be, collecting as part of their own, fair value processes. So, you can see as we work through this, start at the bottom and work our way up here.

So, the most common measures which are included as part of fair value assessments, number of complaints, customer retention, investment performance versus agreed benchmark. These are kind of  some of the harder tangible measures that we talked about previously. So that investment performance is there. But it's all kind of hard numbers. And again, kind of challenging the advice profession as a critical friend, I'm not sure how but your customer retention figures for example, how robust and it necessarily is, it's evidence to your customers which you are delivering fair value where it becomes much more challenging for firms to collect and much kind of working our way up a chart, it's kind of its measured informally, but it's not part of the fair value assessments or into these more intangible benefits, which, as you recall earlier, these are some of the things which consumers really do value as part of their adviser. So the customer satisfaction, tracking goals and outcomes, not just investment performance, but against kind of a wider financial plan as well. And just overall satisfaction from customers.

When we spoke to advisers around this, we had quite a few in depth conversations with advisers about this process, evidencing fair value. And I think it's fair to say there's a bit of frustration amongst the advice profession. They're finding it quite hard to understand exactly what data the regulator is expecting. And, in particular, what what's the right balance here to, to measure the unmeasurable. These softer benefits that consumers value that advisers are delivering to them. It's not it's a simple number on a spreadsheet which then gets put into a data tab. How could that be measured in a time effective manner, particularly if, they're for smaller firms, which, as everybody knows, are reflective of about 90% of the advice sector have less than five advisers.

So, I think this is an area where, we would urge the FCA perhaps just to do a little bit more guidance, share some good practice examples that are out there, with the advice profession, just to set out exactly what's the proportion should it approach here. What sort of things are they expecting the advice profession to be doing in terms of some of those good practices just to kind of shine a light around that.

We spoke with quite a few firms who are starting to implement more detailed customer surveys, customer questionnaires and being considerate of kind of the right time to deploy those surveys and the best way to do it. So, for example, having a few questions at the end of a client review process. Do you understand they're checking understanding of what what's being talked through.

Are you satisfied with what's happening. But also, then following that up with that, with a survey via email to allow customers perhaps who are embarrassed to say anything other than nice things face to face to an adviser gives them the opportunity to give warts and all feedback without having to feel that they're in the same room as the individual by giving feedback to, I think, little things like that. Again, that feels to me like a good approach for a firm to be taking and is quite proportionate for that, but for a small business to be doing. But I'm not the regulator, I think that that's where the regulators should be giving advice as a bit of a helping hand. I mean, the good news for those on the webinar is that we did have the FCA present on the media briefing, which we conducted where we launched this report.

So hopefully, they do appear to be listening to these things and time will tell whether some of that good practice will be shared. But I think generally for advice is we find they are supportive of consumer duty. They're certainly supportive of the kind of the overall objectives around improving customer outcomes that consumer duty kind of is built upon. And they're actually, in a lot of cases, finding it quite invigorating. The process of yeah, redefining your target markets and making sure that your services represent fair value. So, nobody is saying that I really think this is a waste of time and it doesn't want to be done. But, just a little bit of more help for the regulator I think as to what's this proportionate approach and what does good practice look like would be would be much appreciated.

Jamie. That's it for me. I don't know if you've got anything further to add to that.

Thank you Mike. Really interested. Thank you for walking through that. I mean, just on that final point, which I think is really the I guess the poignancy of all of this work is how do you measure value? How do you measure something that is so subjective, so intangible? As we've put it throughout the report. And of course, we're being asked to do that. Advisers are being asked to do that in the context of the consumer duty. The regulator is keen that we properly understand value. So that's what this report is ultimately all about. I look at the consumer duty, as I've always kind of used the phrase that it's like moving from treating customers fairly to treating customers well, and with the caveat of being able to prove that now, in the whole sort of chain of how we deal with the value chain, if you like, of how we deal with customers.

Advisers are the closest to clients of all those in the chain, so they are very well placed to understand what kind of outcomes do people actually have, and how do we prove that those are good outcomes and they're making good decisions. And, in many cases, enjoying a good retirement as a result of the advice and, and the help that they're receiving.

But I suppose what this report points to is that while we can break that down as much as we may like, it's actually quite difficult to pinpoint how you measure value and how you measure the value that's being provided to clients. So, we don't underestimate just how difficult this is for advisers in a post-consumer duty world, if you like.

So that's what this is all about. Our report on the meaning of value is about helping to break down what evidence we can glean from consumers, from clients, and from the views of advisers who are running, firms and dealing with those clients as to what value really means and how that, how that can be measured in some way.

So we hope you find it helpful. Thank you very much for listening. Thank you for joining. And thank you very much, Mike, for, walking us through this and of course, for doing the research in the first place. Thank you. Have a good day. Bye.