There’s a world of difference between saying you do something, actually doing it and then proving you do it.
That’s why we’re fascinated by the latest offering from the Initiative for Financial Wellbeing (IFW), who is offering an audit so that firms can prove that they genuinely offer financial advice aimed at making their clients happier.
We’ve asked Chris Budd to explain more:
Introducing Financial Wellbeing
Back in the autumn of 2015, I spent some time researching the topic of money and happiness, with the result being The Financial Wellbeing Book.
At the time, a Google search generated only two other uses of the term. Now, it seems that the term financial wellbeing is everywhere. Financial adviser firms, Fintech, lenders, product providers – it would seem everyone is falling over themselves to claim that they can increase their clients’ financial wellbeing.
I have seen a few financial advice firms make the claim on their website. A quick look at the ‘What We Do’ page – revealing the usual list of pensions, investments, tax planning – would suggest that the only thing that has changed is their marketing.
Financial wellbeing advice
So, what does it mean to offer financial wellbeing orientated financial planning?
The IFW was set up to provide a meeting place for like-minded individuals, those who want to help make their clients happy and not just wealthier.
It was also established to lay down some markers of what financial wellbeing is – and to provide guidance as to how it can be delivered.
We have been asked by a number of our member firms to provide an audit of their firm in order to gauge whether they are delivering financial wellbeing advice – and to provide a pathway for how they might improve.
As well as providing an assessment of the service proposition, therefore, the audit also provides changes and improvements a firm might consider to strengthen the element of wellbeing in the advice that they provide.
Marketing financial wellbeing
A firm which passes the audit will be able to display the IFW logo on their website (assuming they are individual members). They will be able to tell their clients that their advice is designed to make them happier.
A firm claiming to offer financial wellbeing but not showing our logo will not have been independently assessed and had their claims ratified.
What the audit entails
Our definition of financial wellbeing is not something we have simply made up! It is based upon academic research taken from a broad range of sources (details in the back of The Financial Wellbeing Book), and is becoming the standard for how to explain financial wellbeing.
There are five parts to financial wellbeing:
- A clear path to identifiable objectives
- Ability to cope with financial shocks
- Control of daily finances
- Financial options
- Clarity in security for those we leave behind
The audit takes these five areas as its starting point, and assesses whether the advice being provided is likely to increase the clients’ wellbeing in each of these areas.
For example, a firm whose advisers talk to their clients about the purpose of the money and provides a pathway towards that purpose is likely to pass our audit.
A firm whose advisers only talk to their clients about investments, pensions and tax is unlikely to pass our audit.
The financial wellbeing audit costs £400, with £250 annual renewal (all figures quoted plus VAT).
Not all companies will pass the audit, however, we do provide guidance as part of the response. In this way, we provide guidance to firms as to how they can make their advice process one that is aimed to help their clients to be happier, not just wealthier.