Rod Bertino examines how the FPA consultation paper on adviser remuneration could change how businesses are run.

Without wishing to pre-empt the find­ings of the current enquiries into the financial services marketplace or dictate a remu­neration/pricing model for every advisory practice in the country, there is no doubt that the increased focus on our profession will result in changes to the way many principals run their business.

If we use the following key principles from the FPA’s consultation paper as a starting point:

  • Consumers must be able to understand the fee they are paying.
  • Consumers must be able to compare the fees they are paying.
  • Consumers must be presented with fees that are separated between advice and product.
  • Consumers must agree the fee with their ad­viser and should be able to request that it is turned off if no ongoing advice is being provided.
  • Consumers should pay for the services, not the product provider.

We recommend that all advisers review their business model and ensure that they are able to:

1. Clearly articulate to both existing and po­tential clients, just what it is exactly you do for the money you receive. In our experience (and in every country we work in) many advisers struggle with this concept. What is your client value proposition (CVP)? And, if you have developed a CVP for your busi­ness, do you take every opportunity to regularly reinforce it with your clients, staff and alliance part­ners? Ensure it appears in your corporate brochure, on your website, on all your stationery (letterhead, newsletters, business cards, et cetera), and is promi­nently displayed in your office.  As sad as it might seem, some clients can quickly forget what you actually do for them!

2. Present your fee structure in a clear, unam­biguous way. Irrespective of the outcome of the fees versus commissions debate, all advisers will have to be able to clearly explain their fee structure to each and every client, before they can take any action. And, in doing so, you will most likely have to dif­ferentiate between the different phases of the client relationship:

a) Initial – advice and strategy.

b) Implementation – product selection and manufacturer liaison.

c) Ongoing management– client service and regular plan/portfolio reviews.

Consider the potential impact on your existing revenue levels if clients decide that they are not getting ongoing value and request that their fee be turned off. Do you have a significant percentage of “inactive” clients who do not receive ongoing service and support but who continue to pay a trail fee or renewal commission? If so, your ongoing/recurring revenue could come under threat.

3. Directly related to the previous point, what will be the impact on the market value of your prac­tice? A “multiple of recurring revenue” is still the most commonly used method to calculate value. Ensure that it is a light at the end of the tunnel and not a train heading towards you!


1. Develop or revisit your CVP – is it relevant, understandable, sustainable and achievable?

2. Review your segmentation model and aligned service matrix. And, if you don’t currently have one, start thinking about it!

3. Ensure your communication program matches the expectations of your clients. Frequent, proactive and personalised communication is a major driver of profit and client retention.

4. Satisfy yourself that your clients are happy with your services. Ask them – conduct an independent, confidential survey.

5. Review your current business model. Decide if you are selling a product, providing advice or doing both.

6. Prepare a document which clearly outlines your fee structure.

7. Understand your profitability drivers – do you know how much it actually costs to deliver your services? Which clients are truly profitable and which are not (and therefore effectively being subsidised)? Do you measure (and report on) “profit per client”?

8. Decide what to do with those clients who no longer fit your model.

9. Consider asking an external business expert to help you work through these important issues – someone whose experience and expertise you respect (could be a coach, respected PDM/BDM or successful CPA, for example).

10. Don’t put it off. Start now to consider these issues – they are all important and, we would suggest, critical to a successful future.

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