Advisers are reporting they are increasingly charging a fee for their services, rather than working under a commission-based model.
Michael Miller, a certified financial planner and principal of MLC Advice Canberra, says there is now an expectation among consumers there will be a fee payable for advice.
“Clients and prospective clients are willing to pay a fair fee, but it’s important for advisers to be clear about explaining what it is they do, and why it’s worth spending the money,” Miller says.
He explains that one reason clients are prepared to pay a fee is because more advisers are marketing their businesses based on a specialty in a certain type of advice, such as aged care. Others are marketing their services to a particular client group, such as IT professionals or small-business owners.
“By developing more in-depth knowledge about the challenges and needs of these groups, advisers [make themselves] more useful to their clients, which is reflected in the fees they charge,” he says.
As a result, there is more diversity in adviser business models and more specialisation in the financial planning profession.
“A growing number of financial planners are referring prospective clients to colleagues if their own business model isn’t the best fit for the client and they know a good planner who can help,” Miller says.
Value is essential
Tim Wedd, executive director of Crystal Wealth Partners, agrees the advice sector is now in a post-commission world, risk insurance notwithstanding.
“But this is challenging for many advisers, given low investment returns,” Wedd says. “Clients are now more fee aware, ask more questions and evaluate what is delivered for the fees being charged.
“If the fees don’t stack up, clients are baulking at the cost. Having said that, there is growing awareness that proper advice is not free. This puts the emphasis firmly on the adviser to demonstrate value for cost – particularly for higher-net-worth clients.”
Wedd says this puts the onus on advisers to be accountable for the solutions they are delivering to clients.
“The right fee structure greatly enhances the client and adviser relationship,” he says.
Omniwealth Services is one advice business that has switched to a fee-based model.
“We’re a fully integrated business,” Omniwealth managing director Matthew Kidd says. “We have accounting, legal, financial planning, mortgage and property divisions. We look at every client individually in terms of fees. So, if we do their tax, super fund, compliance, estate plan and financial plan, the fee is the sum of all those parts. Some clients are on an annual retainer, but it is still based on hours.
“We rebate our insurance as well, so when a client’s paying us and we get a $5 million dollar insurance policy, whatever we get paid goes back to them.”
His advice for other advisers is to think about the client’s position when calculating fees.
“Whenever you see a professional, there’s nothing worse than feeling you didn’t get value for your money when you pay that bill,” he says. “Clients need to feel they get value. So over-service them. That’s the key.”
