Value for Money in Finance: Cutting Costs While Preserving Value
Since the ban on inducements in the Netherlands in 2014, financial institutions have gravitated toward cutting cost in investment value propositions and scaling through standardization to remain competitive. However, with new regulations on the horizon the industry faces mounting pressure to strike a delicate balance between reducing prices and delivering added value to clients.
At its core, “Value for Money” is a deceptively simple concept, combining two elements: value and cost. But how can institutions enhance the perceived value of their services while maintaining profitability? Price reductions, index-based investment engines, sub-advisory models, and scaling through technology are just some of the strategies being explored. Yet, focusing solely on price can lead to unintended consequences, such as diminishing portfolio outcomes or raising questions about the value of services.
The challenge lies in avoiding common traps, such as prioritizing cost-cutting in isolation, and instead leveraging opportunities that create value-for-money at scale. Whether it’s through mass customization, improved portfolio transparency, or delivering insightful ESG and risk analytics, institutions will have to reflect on their approach to align with evolving client expectations and regulatory demands.
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