Why the industry should not ignore Mrs Miggins on value
Value is a subjective concept which is impossible to define as a formula.
The notion was almost designed to infuriate an actuary, which is one reason why its introduction into the governance frameworks of the industry – courtesy of Consumer Duty and Assessment of Value requirements – is proving challenging for so many.
The answer to the value question has to come in part from customers, not simply people in the industry marking their own homework.
After all, according to the fund management industry in early Assessments of Value, about 97% of funds are delivering good value. Anyone reading this knows that this is quite simply a load of rollocks.
I have still not quite recovered from the chair of a large asset manager – my worst ever industry meeting on record and I have had a few – belligerently telling me that there was no point asking consumers what they think, because “Mrs Miggins does not understand what we do”.
First, if she does not that is your fault. Explain it better.
And second, Mrs Miggins has an innate, internal algorithm, which makes her well able to have a view on whether she is getting value or not. Most people we interview do.
Holly Mackay: Where do asset managers sit on the consumer duty map?
Price and satisfaction are very different concepts
Last year, we expanded our larger quantitative research programmes, which encompass 30 asset management brands, to include the DIY investment platforms in our value analysis work.
There is plenty of common ground in what consumers value about funds, platforms and advice.
For example, in December 2022, we asked over 3,000 DIY platform customers to rate their platforms, from a range of 30 providers, against multiple criteria.
One was value for money. Another was how likely they were to recommend their platform to friends or family or what we call a Net Promoter Score (NPS).
We see many differences in how consumers think about value for money, and their likelihood to recommend.
This tension between price and satisfaction is present in every part of the financial services landscape. It is not uncommon for people to know that the fee they are paying is high but also to say they are very happy with the outcome.
For example, Fundsmith – a perennial bestseller with a punchy annual fee of 0.94% – will typically be ranked very low by consumers when asked to consider value in terms of price. But it continues to score very highly when we ask about general value. Customers are happy with both value at the point of exchange, and ongoing value.
The same is true with DIY platform market leader Hargreaves Lansdown, typically known for being pricey. Benchmarked against peers, it does not rank in the top firms in terms of value for money. But it is second out of 30 platform brands in terms of NPS.
Conversely, Vanguard – increasingly popular with the under 40s and known for its low-cost funds – rates very well for value for money, but is not in the top eight when it comes to NPS.
There is much we can learn from both relative and absolute analysis of what our customers say about value.
Value vs most recommended – based on customer ratings
Component parts of value
Performance and price are key pillars of value. But trust in the brand (or individual), peace of mind, and understanding communications, also feature strongly.
Value frameworks feature in many other sectors, often as part of procurement processes. For example, the Australian government cites six other factors in addition to price in its value for money guidelines, including sustainability, whole-of-life costs and the supplier’s experience and performance history.
Finding dividend certainty in uncertain times
Value is not common to all, nor is it static
Meanwhile, last month we conducted dozens of interviews with advised clients, as part of work to articulate and measure the pillars of value for advice firms.
Any adviser I speak to understands the importance of peace of mind, and trust. I will never forget speaking to a lady recently diagnosed with breast cancer about what she valued from her adviser. It was not the performance of her ISA or the fees. The quest for data and empirical evidence cannot lead us to underestimate this.
Value is not common to everyone and differs by profile. For advised clients, it differs mostly by age, confidence and current life events.
Nor is it static. On our platform comparison tables, which have 100,000s of visits in the ISA season, we see that the importance of pillars of value changes depending on the macro-environment.
Right now, pricing related comparison is at an all-time high – consumers are filtering and browsing on pricing, more so than any other metric.
Customer reviews are the next most important metric.
Given current news, I have no doubt in the near future, it will be longevity and financial strength of provider, with questions around smaller brands as ‘banking crisis’ headlines abound.
Articulating, and evidencing value is not easy. But Mrs Miggins knows. You just need to ask the right questions. And open your ears to the answers.
Holly Mackay is founder and MD at Boring Money
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