Share
Sense of value
The year of the Olympics and the RDR is 2012. Are you ready? Time is ticking away before the RDR comes into force and advisers have to decide whether their business models are viable in a post-RDR world.
Advisers have to ensure their practices are in the best possible shape and this shape comes in the form of wholly embracing a fee-charging structure as early as possible.
Last year was not easy for advisers but what allowed some firms to weather the storm was the ability to have a good level of recurring income. The fee-based model encourages advisers to retain clients and get sub-stantial amount of income that is not reliant on new business.
A move away from up-front commission towards fee-based practices is inextricably linked with providing great service to existing clients. To ensure that clients get great service, we use, for example, model portfolios, asset allocation and review portfolios annually. Demonstrating value ensures that the business is in top shape.
Commission-based companies also tend to practise other non-viable solutions, such as cross-subsidising clients. These advisers need to step back and think about their model. Surely a business solution where every client is profitable is preferable? An implemented service proposition is a practical way of seeing which clients are earning an adviser what income.
Extra security can also be gained by signing fee agreements with clients, ensuring a business will be paid irrespective of whether a client takes out a product.
But as a Legal & General survey has shown, there is a gulf between what advisers and potential clients perceive as the right level of fees for advice, with advisers valuing their time on average at £170 an hour and clients at £67. It is no secret that the sector is undervalued and advisers are selling themselves short. If the value added can be demonstrated with ongoing service, there is no reason that advisers should be thought of as the poor cousin of other professions.
To run a successful practice, the key mantra has to be “service, not sales” and the fee-structured adviser firm embodies this. Advisers can be paid from a solid, sustainable base and feel safe in the knowledge that next month’s overheads can be covered. This model is essential to the health of our industry and those unwilling or unable to get into shape before the deadline should consider if this industry is for them.
Sheriar Bradbury is managing director of Bradbury Hamilton
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
