As you seek to build a sustainable business for the future, you have to calculate how your advice charges should be structured, justify your fees and ensure the service being charged for is being delivered.
Headlines:
- There is no right fee structure, just one that works for your business.
- There are a variety of charging structures all of which have pros and cons.
- Many of the intangibles can be bought to life by the use of lifetime cash flow planning.
- There are four key differentiators - products, distribution methods, different levels of service, different range of services.
- Know how you compete i.e. is it on price? are you a generalist or a specialist?
- 1% ongoing potentially under threat.
- Know the cost of taking on a client.
- Trust, peace of mind and continuity of relationship is key.
- There must be consistency of the charging structure through your business.
- Value yourself.
Key issues and challenges:
- Costs of running an advisory business are increasing and there is a possible downward pressure on fees.
- Certain charging structures will put advice out of reach of more people.
- If contingent charging isn’t right for DB transfers why is it right for other forms of business?
- Charging a fee for a plan and then implementation needs careful thought as if it costs more for implementation then advice it undermines the value of the advice.
- If your charging structure contains too many aspects it is confusing for clients.
- Should you also express a flat fee as a percentage?
- As the client demographic shifts you are possibly dealing with 3 different generations in the near future. How does your proposition and its delivery fit in?
- Believe in your worth/value. If you don’t your clients and staff won’t.
- Should you put a cap on your charges for larger clients?
- Migrating existing book to a new charging structure.
- Quoting a menu approach could be difficult under MiFID II.
- Communicating the intangibles especially to new clients.
- Is your pricing structure delivering the results you expect?
- Not getting paid for work purely on a contingency basis
- Currently clients are ok paying for advice/services but concerns are Millennials wanting everything for free.
- Don’t make your structure too complex and make sure you can collect it easily.
- Sometimes the business has to ‘sell’ itself especially if it is in a beauty parade and we may not be that good at this.
Conclusions and solutions:
- Establish a fee structure that is right for your business.
- Accept that trust and other aspects are intangible and can’t be measured but are highly valued by the client.
- Work to a plan that makes the clients’ money mean something to them as this makes what you do more tangible.
- A lifetime cash flow plan helps bring the intangibles to life.
- Cash flow modelling is key. Very difficult to advise a client without it.
- Make sure you provide your clients with useful, accessible information.
- Your charging structure should be sense checked to see if it is delivering the income/profits you expect and that you understand associated costs of taking on new clients.
- Review your touch points with clients to establish if you are in their view on a regular basis.
- Look at how you deliver your services and do you need to be more digital?
- Don’t give discounts in inappropriate places. Better to turn a potential client away than discount your fees.
- Believe in yourself and place the correct value on your offering.
Expert: Nick Bamford - Informed Choice, Tony Bray - threesixty, Alistair Callander - The Private Office, Gabriel Crayford - The Private Office
Facilitator: Martyn Laverick - Soprano Consulting
