Don’t confuse value with price

Royal London, the UK’s largest life, pensions and investment mutual along with research partner, the lang cat, clearly shows that value cannot be defined on price alone.

45% of consumers define it as a combination of getting value for money and getting their money’s worth, while only 16% define it as price.

The inaugural ‘The Meaning of Value’ report combines both consumer and adviser research to compare how value is defined from different perspectives. For example, advisers believe their clients value peace of mind (66%), helping them reach financial goals (40%), and clear communications (38%). The research shows that consumers do indeed value these aspects but also place more emphasis on positive investment returns. 50% of consumers who have paid for investment advice say it is indeed the most important thing for them. When asked, nearly two-thirds (64%) of consumers said they would prefer a product from a provider with an excellent reputation but at a higher price rather than the cheapest product available. Equally, when asked what they valued from product providers, good communications came out top (18%), followed by customer service (11%) and security/trust (9%).

Jamie Jenkins, Director of Policy at Royal London, said:

"Measuring value is more an art than a science. The research we have carried out with the lang cat has shown that different people value different things when considering products and services, and it is often multi-faceted and nuanced. The temptation is to boil everything down to price because it’s more tangible, but that is only part of the ‘value for money’ equation.

"If we are truly going to adopt the spirit of the Consumer Duty, then we need to develop a better understanding of what people really value. Only then can we forge a step-change in improving customer outcomes. By developing this research, we aim to start that debate."

Mike Barrett, Consulting Director at the lang cat, added:

"We hope that advisers will find this report a useful read, not only helping them to enhance their understanding of what consumers value, but also with measuring and benchmarking the value of the services they offer.

"This benchmarking exercise is not only good business sense but is now a vital part of Consumer Duty. However, the research also shows how difficult it can be for advice firms to evidence fair value. Value is subjective, and consumers will often combine multiple factors to make their overall value judgement. Some of these factors, such as price and investment performance are easily measurable, but other factors such as peace of mind are less tangible. The regulator should help advisers with good practice examples showing how these aspects should be measured under Consumer Duty."