Planners expect revenue from pure fee-for-service models to increase to almost a quarter of their total revenue over the next three years, new research has revealed. The inaugural Investment Trends Planner Business Model Trends report, based on a November 2007 study of 1179 planners, found total revenue derived from “pure fee-for-service” arrangements, including fixed rate and hourly fees, had increased from 15 per cent in 2006 to 16 per cent in 2007.
“The report showed the strongest anticipated growth in fee-for-service was among those planners who currently had less than $10 million in funds under administration, who expected to increase the fixed rate and hourly rate revenue from 14 per cent of total revenue in 2007 to 29 per cent in 2010,” says Mark Johnston, principal of Investment Trends. According to the report, 11 per cent of planners derived a majority of their revenue from pure fee-for-service models last year, a slight increase from 2006.
Planners who derive over half of their revenue from pure fee-for-service spend more time discussing planning for financial and lifestyle goals and less time discussing insurance needs, according to Johnston. “These planners are more likely to advise their client base on self-managed super funds, direct shares and listed investment companies,” he adds. “They also have far more autonomy than other types of planners in selection of platforms and planning software.” The definition of fee-for-service used in the report excluded asset-based fee-for-service, which was captured separately.
