How to measure the impact of your advice

Posted 14 May 2024 by Chris Budd

One of the requirements now facing advice firms under the Consumer Duty rules is the need to demonstrate the impact of advice.

In a way, this is nothing new. For example, client testimony videos have long been an excellent addition to any financial advice firm’s website. 

All advisers will have stories of clients who are in a better place as a result of their financial advice. But how does one measure this? And measure it in a way that can be reported?

Or, to ask a rather more incisive question – what actually is it that you need to be measuring?

What clients value

There are lots of benefits to quality financial advice and planning; many ways in which a client is in a better position as a result of the advice that they’ve received.

Perhaps their investment portfolio outperformed its benchmark. Maybe they’re wealthier. Perhaps they saved some tax. Maybe the clarity provided by the cashflow report enabled them to make a big decision. They probably have peace of mind and can seep better at night.

Some of these can be measured, such as benchmarking of investment portfolios. Peace of mind and satisfaction are much harder to quantify, however.

Client surveys are one valuable way

If you want to know if your client is satisfied with your service, why not ask them?

This route has its limitations, however. Customers of the Blockbuster video rental chain will have reported being satisfied with the service that they received – just before online streaming led to the end of the business.

There is one thing that, I would suggest, is essential to measure, but, up to now, has been impossible.

Has your advice made your client happier?

Measuring financial wellbeing

Financial wellbeing is a broad topic of study, covering all aspects of our relationship to money. It’s much deeper than just being good at managing money. It involves understand the sources of joy in life, and how money may help or hinder achieving this.

Our relationship with money should be one that increases our wellbeing. This is a nuanced topic, however. All too often our relationship with money actually works against our wellbeing.

The Financial Wellbeing Pulse has been designed by academics and uses the latest research into what makes us happy. It answers that crucial question: is our approach to money helping or hindering this search for wellbeing?

The Pulse works like this: the firm sends a unique link to the client. The client completes the survey (it takes about 10 minutes). There are two sets of questions, one which covers general wellbeing, and a second which covers the client’s relationship with money.

The client gets a score. They also get a short report explaining the report, with a copy sent to the adviser.

Before the next review meeting, the client completes the survey again. They get a new score. This demonstrates the impact of the financial advice on the client’s financial wellbeing.

Crucially, the firm gets a dashboard of results across all clients, and all advisers.

The firm can then use this data for training and marketing. Imagine that the first thing a new client sees when they go to your website is: “On average, we increase the financial wellbeing of our clients by 15%.”

It can also use this information to demonstrate to the FCA the impact of its advice on its clients’ wellbeing for Consumer Duty purposes.

It’s a tool which is very simple to use, but which produces very powerful data. It enables a firm to measure the impact of the most important outcome of its advice: the clients’ wellbeing.

Find out more about the Financial Wellbeing Pulse here. Chris Budd’s new book, The Four Cornerstones of Financial Wellbeing is available now.

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Chris Budd

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Chris Budd