Research from JP Morgan shows that although the demand for transactional services fall and demand for ongoing service increases as a client’s net worth increases, overall, there is far more demand for transactional services.
Respondents state that they prefer to pay for advice by task instead of ongoing charges. Even above £500,000, there is a desire to “pay as you go”. So, why are most firms operating with ongoing charges between 0.5 and 1 per cent?
There are two reasons: inertia, which is negative, and delivery of good service, which is positive. There is a view that ongoing charges may become unsustainable as clients think about their cumulative effect and whether they are good value for money. This will take time but this trend and the research suggest that competitive pressure upon advice charges will rise.
To resist the price challenge, answer the following:
- Is your proposition clear, concise, published and under-stood and promoted by all your advisers?
- Do you have effective promotional material to explain your proposition?
- Can you sum up what you offer to clients in a few words?
- Do you have to discount regularly to acquire new business?
- Do clients have some choice about the amount of service they buy from you or do you run with a set menu?
David Shelton is the author of “The Business of Advice” book and website www.businessofadvice.co.uk