Brett Davidson: Not charging up-front is lunacy
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FP Advance chief executive Brett Davidson says it is “lunacy” for firms to set up adviser charging models that do not charge clients for initial meetings and reviews.
Davidson said clients place the most value on initial meetings and the review process but typically the only part of the advice process firms charge for is implementation.
Davidson said: “This whole idea of not charging for the up-front stuff is just bad business. Advisers add stacks of client value for that first phase. To not charge anything for that is lunacy. Charging nothing up front kills your profitability and is a threat to your business. My advice would be to fix the real problem, do not run around not charging anything for stuff that is of huge value.”
Evolve Financial Planning director Jason Witcombe says his charging model is built around long-term client relationships, so Evolve has chosen to spread the cost of advice over time rather than charging an up-front cost. But he says: “Brett is exactly right, in that firms should provide the service that clients want. Setting up products is valuable but it is not what clients value the most.”
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Readers' comments (3)
David Parkinson | 21 Oct 2011 3:26 pm
Thanks for your input here Brett. I have not been charging for initial meetings since 1996 and never realised I was so wrong! Amazing thing is my business has not yet gone bust but I will be sure I correct my ways before the bailiffs close in.
Thanks again.
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Andy | 21 Oct 2011 4:05 pm
IAs per David P, i have not been charging for initial meetings since 1987 and have been profitable. Won't be charging after 2013 due to dropping pension & Investment business as just to big a risk re compensation claims & PI costs should a provider go bust and the bill rests with IFA's regardless if they sold the products or not. Over 20 years profits can be lost should a "big one" goes down leaving those IFA's left with a very big BILL.......just look at the EURO crisis, if a few tumble....
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Julian Stevens | 24 Oct 2011 9:53 am
I may be wrong, though I'd been under the impression that the FSA has decreed we aren't allowed to charge for the initial factfinding meeting.
That having said, I do think it's very unwise not to charge for the work you do (assessment of the client's needs and objectives and the formulation of an appropriate strategy) between that first meeting and the implementation of any product/s. If you don't, there's a strong risk that the client will either not bother to read your report or, having done so, just say Thanks very much, I'll think about it and get back to you. That is not a sensible business model and I decided ten years ago that whatever work I do for a client after the first meeting must be paid for. On the very few occasions that I've relaxed that rule, no business has resulted and the work I've done has been a waste of time. If a prospective client refuses to pay a fee, the reason why is pretty easy to work out and your best course of action is simply to walk away.
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