It’s the million-dollar question – how should financial advisers charge for their time?

Each financial adviser uses their own unique calculation process to decide on the right fee to set for clients, and a conference in Hobart last week heard that the price charged to clients remains a critical issue.

While some advisers sat in silence and didn’t partake in group discussions or share their fee structure, other more outspoken advisers were more than happy to share how they charge. The general consensus in the room was that fees need to be increased, but how those fee increases are calculated appears to be a mix of both science and art.

A survey of the 60-odd financial planners who attended the Boutique Financial Planners conference held in Hobart last week revealed that one of the most important challenges they faced was pricing and value proposition. So, the topic was thrown open to conference delegates to discuss.

Advisers consider the costs involved in running an advice business, including licenses and insurance, calculating the years of experience and then developing an internal pricing model that takes into account the financial complexity of the client. Some advisers don’t charge clients for the first meeting, while others do.

The discussion followed the release of research from Investment Trends last week which revealed Australians considering advice are only willing to pay $800 to help start a retirement income stream. The research showed there are 1.3 million Australians still seeking financial advice in the next two years, but only 3 per cent of them would be willing to pay more than $2000 in fees.

One outspoken adviser told the room he charges every 13 minutes in increments: “It boggles my mind that you guys don’t log time, it does my head in. How can you run a business if you don’t calculate your time,” he said.

“You need timesheets. It’s too easy not to do. It’s very academic, but no one appears to be doing the academic side of things here.”

Another adviser added: “Our mantra is a fair days work for a fair days work. If you’re spending time with a client, then you need to be careful that you’re not giving someone too many hours unpicking their finances, which can be just as damaging as not giving your clients enough hours,” he said.

Some advisers admit to using a spreadsheet to calculate cost, while others use digital timesheets. One said: “We have a fee structure matrix that works in the favour of clients some years, and not in their favour other years.”