Who demonstrates value to the client?

Financial Simplicity Stuart Holdsworth

27 May 2022
| By Industry |
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In the new ‘fee for service’ world, the investment value proposition of an advice business has changed from one centred around the promotion or selection of products to how they add value to a client’s investments. In other words,  it’s no longer just about providing access to products.

The challenge of demonstrating investment ‘value add’ is also exacerbated by easier customer access to:

  • Investment products on listed exchanges
  • Tools, information, online advice capabilities/robo-advice to manage their own investments

To be sustainable, the value proposition of an intermediary has had to become more advanced and sophisticated. Inside firms today, there’s a new essential role of the ‘investment proposition owner’ to complement other functions such as the investment committee.

The three key questions wealth management firms need to consider to determine their optimal investment proposition are what is the:

  1. Long-term sustainable customer value proposition?
  2. Operational model to deliver that value proposition?
  3. Financial or economic model that allows the business to be both sustainable and profitable.


While the process of understanding client needs, planning and providing advice is valuable, it is typically focused on a specific event. This makes it challenging to create long-term revenue streams, which is key for a sustainable business to operate. Firms now need to have an investment proposition that adds value to clients’ investments on an ongoing basis, which brings the concept of client portfolio management into play.

The challenge is, with robo-advice and automated portfolio management solutions such as SMAs, what additional value can an intermediary add to client investment proposition? The solution is a portfolio management experience tailored to each specific client. This means delivering not only to their investment profile, but also individual rules, preferences, and constraints. These need to be considered simultaneously, whether that be single account, multi-account, multi-entity and all the complexities that go with real life clients. This advanced level of tailored portfolio management often extends way beyond the capabilities of robo-type solutions.

As there are vastly different approaches to personalised portfolio management, it means that it is far from a ‘one size fits all’ discipline. Hence inside a firm today there is not just the specialist roles of an investment committee to select investment programs, there is also a new essential role of the ‘investment proposition owner’.

That role really must scrutinise not only the core of the value proposition from a customer’s perspective, but also the associated operational and financial models. They need to make them all work together in a way that brings long-term sustainability to the client relationships and the firm.

Depending on the firm, the investment proposition owner may be a nominated individual or a committee, that resolves the complexities of what is the firm’s specific investment proposition, consistent with their uniqueness and identity.

Ultimately, the value proposition needs to be something that the consumer couldn't or doesn’t want to do on their own. It may be those without the time to do themselves, the knowledge to make decisions, or who can’t see how to apply information to their situation, or perhaps the more human aspects of having the necessary discipline or courage. 

All consumers in theory have tools to access investments themselves and manage a portfolio, but many don't, generally because they lack one or more of those abilities to match information to their situation, and hence see value in someone doing it for them.

The customer value proposition is becoming not about the investment strategy itself, however, more about the application of an investment strategy to each specific customer client, ultimately in their unique best interests.

The key difference here is that every investment strategy choice needs to be considered in the context of each client’s portfolio and situation and given that some people have strong preferences on some investments (like ESG considerations and personal compliance obligations), combined with unrealised capital gains tax (CGT) situations, the resulting assessment for each client can have significant impact on overall client outcome. 

With CGT being the largest cost of investing for many, we are even seeing the notion of what is called ‘tax alpha’ in investment propositions, where part of a firm’s proposition is to manage client portfolios to not only an investment strategy but doing this very much considering client capital gains reality.

The opportunity for an advice business is developing a value proposition that is all about helping the customer have an experience of investing those moulds around them, their situation, skills, and sensitivities. Importantly, this personalised portfolio management service can be offered by firms at a premium fee level.


The complexity of introducing personalised portfolio management can cause firms to give up on taking on this path. However, abandoning personalised process can leave firms with a proposition that’s more commoditised and lacks the competitive advantage to deliver long term customer value and sustainable revenue for the business.

To successfully deliver personalised portfolio management requires an efficient and scalable operational model to sustain operating margin. This typically needs a level of technology to enable an operating process to deliver that personalised customer value proposition with achievable costs and minimal effort.

Designing an efficient operational model often means outsourcing areas of non-specific or differentiated expertise, such as the custody or the ownership of assets to platforms or specialist providers who have distinct competence and expertise. This allows the firm to focus on making the ‘insource’ components most efficient. 

We’ve found that the firm’s investment proposition owner has to think more with an industrial mindset, to include efficiency and scale benefit considerations of how, with the use of technology, to deliver the customer investment value proposition.

Those who fail to meet this level of industrialised process efficiency will find themselves with an operational overhead that could leave them ultimately uncompetitive in terms of client servicing and ability to grow.


It's not just about delivering a sound customer experience and doing it well; it must be profitable. The investment proposition owner needs to consider fee revenues and input costs. 

If the value proposition is too commoditised (and too similar to competitive alternatives), then the costs may be low but also the revenue levels may be too low. If the value proposition is too tailored to each client and delivered too expensively, then whilst fees may be higher the costs may be too high. So, there is a process of navigating the spectrum of portfolio-based propositions that an investment proposition owner needs to do to work out which is optimal for a firm based on its skills and target client base.

At one end of the scale is to do everything bespoke for every individual client which may work at the very, very high net-worth end of the market, but it requires fee levels that are sufficient to do that.

At the other end of the proposition scale where everything is almost a ‘one size fits all’ approach, where the issue is that there may not be sufficient value in the eyes of the customer that they are prepared to pay for over time.

These more commoditised investment propositions can also be in jeopardy particularly when consumers are bombarded with social media, mainstream media channels and the awareness of investment propositions online where they may find the alternative is far more cost attractive and perhaps even more engaging than dealing through a particularly intermediary firm. 

On this spectrum between that bluntness of commoditised offers, and the bespoke personalised service offer, each firm is finding their own sweet spot. This sweet spot reflects not only the target market they service, but also the skills they have that create customer value. Firms with an investment identity and a capability are keen to embed that into their value proposition, using it to differentiate and to improve the client experience and investment performance. 


We found that firms without an investment identity often need to supplement their skills with either external asset consultants or other service providers to bolster their value proposition.

The role of the investment proposition owner is to determine the appropriate customer value proposition experience for their firm. What is the operational model to support it, and what is the financial model of input costs and revenues? Not only do they need to set the standard for the firm, but also constantly monitor and calibrate this in an ever-changing world where there is increasing access to online capabilities that are growing in their attractiveness, ease of use and their interactivity all the time.

This unique role of investment proposition owner in firms today is analogous to the role of the product manager that existed in product orientated firms in the last few decades.  The key difference, however, is that for the investment proposition owner role of today, it's not about a product to distribute, it's about defining both the customer experience and the business model that supports its delivery.

Stuart Holdsworth is CEO and founder of Financial Simplicity.

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