This article was originally written for Money Marketing by Ben Hammond, Wealth and Partnerships Director at AheadMG.
In it, Ben explores the true value proposition in financial services, and why focusing solely on cost can lead to inefficiencies, risk, and poor long-term outcomes.
There’s a phrase that often gets wheeled out when something disappoints or mysteriously stops working just when you need it most: “You get what you pay for.”
It is usually delivered with a sarcastic undertone, a raised eyebrow and the clear implication that somewhere along the line, someone has not fully thought things through — or perhaps tried to save a bit of cash to keep procurement happy.
Financial services is perhaps the best example of this, because the industry is obsessed with cost. Adviser fees are “unaffordable” (see the oft-discussed advice gap); cheaper platforms are always welcome (who doesn’t like to see a basis-point reduction every now and again?); passives only, please.
But value and price are not the same thing, and telling yourself they are can end up being a very expensive and disappointing experience.
Smooth operators worth paying for.
Nobody wakes up in the morning excited about operational efficiency (really, no one?) but everyone notices when it is not there.
“Operational efficiency is one of those things that only gets noticed when it is gone”.
Many investment platforms have built their reputation not by being the cheapest option available, but by being the one that works. Processes, preferably digital ones, run smoothly. Paperwork does not vanish into a black hole. Trades happen when they are supposed to. It is not glamorous or particularly eye-catching, but it is essential.
Yes, you might find cheaper options. And, ironically, the more efficiency exists, the lower the cost should be. But if those savings come at the expense of admin headaches, rework, frustrated clients and advisers spending valuable time chasing errors that should never have existed, you are not saving anything in the long run.
Operational efficiency is one of those things that only gets noticed when it is gone. When it is done well, it quietly frees up time and energy and delivers a better experience for everyone. Surely that is worth paying for.
Market-leading or too good to be true?
The same principle applies to products. Take annuities, for example. With interest rates having turned around since the pandemic, they are back in fashion. Providers promote “market-leading” rates, and it is easy to see why that attracts the attention of advisers and consumers.
“History is littered with managers and strategies that once looked untouchable”.
Onshore bonds are another example, with their popularity boosted by recent changes to inheritance tax policy.
But annuities are not impulse purchases. You are locking in a lifetime income. The rate matters, but so does the provider’s financial strength, the options around death benefits, inflation protection and overall flexibility. A slightly higher headline figure is not much comfort if the overall deal does not stand the test of time.
Reputations can be lost.
Another area where complacency can sting is investing. History is littered with managers and strategies that once looked untouchable.
Remember Neil Woodford? For years, he was the gold standard: strong track record, loyal following, billions under management. Then it unravelled, quickly and painfully.
The lesson was not that active management is broken or inherently expensive, but that success can breed overconfidence and recklessness — and reputations are easily lost.
Rory Marsh: How Value for Money came of age
Today’s success stories are not immune either. Fundsmith remains widely respected despite a period of sub-optimal performance, with Terry Smith regularly reminding investors that no strategy works in all conditions.
The danger is not backing a fund or manager that eventually underperforms. It is assuming they never will.
The real risk is standing still.
The common thread here is not cost, platforms, products or fund managers. It is the risk of staying stationary.
Using the same platform because you always have. Holding the same funds because they have “always done well”. Choosing the cheapest option because fees are all that matter. These are comfortable decisions, but lethargy or indecision is rarely a strategy.
“Change is not necessarily a sign that something has gone wrong; often, it is a sign you are paying attention”.
Do not spend all your time looking in the rearview mirror. Keep looking forward. Review, question and adapt. Change is not necessarily a sign that something has gone wrong; often, it is a sign you are paying attention.
Paying for value.
Firms and clients do not seek advice to build a bargain-basement solution. They want confidence that things will work when they need to, and that decisions are made thoughtfully and strategically.
They also want reassurance that someone is watching what comes next — whether that is regulatory change or the latest government policy shift or U-turn.
“In financial services, paying for quality, reliability and adaptability is not indulgent; it is sensible”.
Sometimes that means paying a premium for a better platform, a stronger provider or a more robust solution. But those costs can pale in comparison with the hidden price of inefficiency, poor execution or outdated thinking.
In financial services, paying for quality, reliability and adaptability is not indulgent; it is sensible. Because one thing we can be certain of is that nothing stays brilliant forever. The trick is making sure you are ready for what comes next.
Take all this into account and you give yourself the best chance of actually getting what you pay for.
If you want to ensure that your strategy is built on more than just cost-efficiency, it may be time to take a closer look. At AheadMG, we help wealth management, financial services and insurance firms focus on what truly drives long-term value for your customers and your business, from platform selection to product strategy and beyond.
Book a call with one of our experts and take the next step towards staying ahead.
