Yellowtail Financial Planning managing director Dennis Hall says it has taken him five years to move to a fee-based model and start earning a profit.
Speaking at the launch of Aifa’s latest RDR report, Advice Horizons, last week, Hall said he has had to constantly revise and change his approach to charging fees since starting the transition process in 2005.
He said: “Over the last five years, I have had to revise the charging structure four times and every time I have had to raise my charges. I had to learn to charge for things that, traditionally, advice firms have given away for free. This means that the financial planning aspects of advice, which most firms do not charge for in the hope that the client will buy a product, must become chargeable.”
Hall also warned other IFA firms that the cost of the transition for his company, which has three advisers, was a lot higher than he expected.
He said: “I was fortunate enough to sell my house right at the top of the market, so I used that money to fund the changes in my business. I had to get this right because basically my house was riding on it.
“We wildly underestimated the cost of making these changes. I did not take a salary for the first 12 months. We are only now finally beginning to see a profit.”
Hall said businesses need to start moving clients now to a fee-based charging structure.
He said: “You cannot show up on day one of 2013 and expect to make these changes. You must start the transition process now because if you are starting from scratch it could take five years to get it right.”