How Genovo helps you deliver clear, concise, consistent and compliant charges disclosure

Nigel Ogram

This month’s blog title just rolls off the tongue, doesn’t it? I considered “MiFID made easy” or ‘Disclosure for Dummies”, but Genovo’s charges disclosure is far more than just ticking a regulatory box (and to be honest, I was feeling rather smug with my “four Cs” idea, at least until I realised I’d been beaten to it, not once, but twice…)

In last month’s blog, I explained how Genovo makes it easy for you to enter charges information. This month, I’m covering the actual report content – the stuff that clients actually read – well they will if it’s presented clearly and concisely!

As with a lot of regulation, there are competing forces at play with charges disclosure. On the one hand, the third outcome of Consumer Duty stresses the importance of client understanding. On the other hand, deciphering the charges information contained within the typical provider illustration can prove tougher than the GCHQ annual Christmas Challenge!

So, what’s wrong with provider illustrations?

We all know that provider illustrations can be used as a method of charges disclosure for most (but not all) advice scenarios. Although this method allows you to tick the charges disclosure box on your compliance checklist, we believe it’s flawed, for three main reasons:

1. 1.  Firstly, some recommended actions don’t result in an illustration. For example, a change to the underlying investment strategy, or an adjustment to the adviser charge of a client’s existing plan will rarely result in a new illustration.
2. 2.  Secondly, can you really expect your typical client to fully understand the two very different examples of charges disclosure below, taken from illustrations from two providers for the same amount being invested into the same product….

3. 3.  The whole idea of using illustrations for charges disclosure falls apart for replacement business. You’ll struggle to get an illustration for the encashment, switch or transfer of an existing plan, so a side-by-side comparison of charges is impossible.

At Genovo, we’ve taken a much simpler view – we show plan charges in a straightforward, easy-to-read format that helps make it easier for advisers to explain, and for clients to understand.

Charges calculations transparency

When we were building Genovo v2 back in 2023, we took the opportunity to refine our charges calculations. We decided to be completely open with our calculation methodology and for total transparency we even explain the formulae we use. We worked on the basis that if you know how Genovo’s charges calculations work, you’ll be more confident in them.

Let’s be honest – all ex-ante estimations of charges are flawed. There are assumptions for growth rates, inflation, earnings, indexation, all of which are highly unlikely to be accurate. Genovo’s crystal ball is no better or worse than anyone else’s, but we are very clear about how our calculations work.

Existing plans – Current Plan Charges

When we were re-designing the charges sections of a Genovo report, we considered at length what clients really need. We arrived at a staggeringly simple conclusion:

1. 1.  If they have existing plans that you’re reviewing, they need to know how much they are currently paying for those plans.
2. 2.  If you’re making a recommendation on any of those plans, they need to know what the charges will be after the advice is implemented – a simple ‘before & after’ picture of charges, so they can clearly see what impact the recommendation has had in terms of charges.

To facilitate the first of these requirements, in a review section in Genovo there will always be a Current Plan Charges step (apart from in Review of Your Existing Protection Plans, obviously…). In a report, it looks something like this:

You’ll note that Genovo exceeds MiFID II requirements by providing percentage and monetary expression of charges for up to four charges categories, as well as at an aggregated level. There’s also a calculation of the aggregated total charge across all plans:

Note that in the above table, blank columns have been retained. However, there’s an option to simplify the table layout by removing blank columns – this is explained in detail in this Knowledge Base article.

We wanted to keep the main charges table as simple as possible, so we restricted the number of charges categories to just four, by aggregating all the investment / fund charges into a single value. However, for total transparency, it is also possible within Genovo to provide a breakdown of all the investment management charges in up to six categories which results in a weighted average charge which is then used in the main Current Plan Charges table:

Existing plans – Revised Plan Charges

Where there’s a recommended action for an existing plan that will affect the plan’s charges, Genovo provides a Revised Plan Charges step. Let’s assume that our spoof client, Simon Sample is being advised to top up and switch the underlying investments of his Transact ISA. This will clearly affect the charges he is paying on his existing ISA in both % and monetary terms moving forward.

The new charges information is then presented in the report in an easy-to-understand way and includes a ‘difference’ column so that the client can see exactly how much more or less they are paying for the plan – a simple but effective ‘before & after’ representation:

If the recommendation is to replace an existing plan, Genovo generates a simple, but highly effective ‘Impact of recommended alternative plan’ table, where clients can see exactly how much more or less the new plan will cost compared with the existing plan, in percentage and monetary terms:

New plan recommendations

For new plan recommendations, Genovo replicates the layout of the Revised Plan Charges tables, but without the ‘Difference’ column:

The charges are clear and easy to understand, as well as compliant. Again, blank columns have been retained for clarity and consistency, but you have the option to exclude them if that’s your preference. The above charges tables look like this when blank columns are hidden:

Plan charges for new recommendation sections are covered in detail in this Knowledge Base article.

Consolidated plan charges section

Although we had lots of positive feedback about the way Genovo handles charges, we also received a great suggestion. Rather than having the various charges tables in their relevant report sections, some Genovo users wanted the ability to show charges in a single dedicated section, which they could then position wherever they wanted in the report.

The Consolidated Plan Charges *standalone alternative* section allows you to do this on a report-by-report basis, with just a couple of clicks.

What about ex-post charges disclosure?

I’m sure you won’t be surprised to hear we’ve got this covered too… There’s a dedicated step in the Important Information section that facilitates this. This step gives you four options for ex-post charges disclosure. Everything you need to know is covered in the second half of this Knowledge Base article.

Conclusion

So – there we have it – Genovo’s charges disclosure is:

• Clear – a simple, intuitive table layout, with transparent ‘before & after’ values where appropriate
• Concise – charges are expressed in percentage and monetary terms and with aggregated totals
• Consistent – all tables follow the same simple layout for ease of client understanding
• Compliant – walks the perfect line between MiFID II compliance and client understanding

I’m pretty confident that only one of those four attributes can be applied to provider illustrations!

Nigel’s knowledge

It’s all very well satisfying Consumer Duty and exceeding MiFID II requirements by having compliant and easy-to-read charges disclosure in your Genovo reports, but if entering the charges is difficult and laborious, it becomes a little self-defeating.

Therefore, to remind you of last month’s blog on how to spend less time entering charges, we’ve built features to help you enter charges into Genovo quickly, accurately and easily:

• The Plan Charges Profiles Library
• Predictive Plan Charges
• Automated calculation of monetary equivalents

Further reading

You’ll find loads more really useful information in:

• Genovo’s series of User Tip blogs;
• the extensive Genovo Knowledge Base;
• the collection of really useful Genovo matrices;
• the ever popular Genovo video tutorials; or

Of course, if you’re still stuck, or just need a helping hand, you can always submit a support ticket and we’ll get straight back to you.

Finally – make sure you don’t miss any of our hints & tips – subscribe and get email alerts when we update our blog.

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