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Robert Reid

It has been said that fees for financial advice are not popular with the

general public. Taking this at face value, it could be argued that the

public prefer “free” advice.

I disagree. People like to know what they are getting for their money and

it is the lack of information on the services that an IFA provides which is

the major barrier

to the acceptance of fees.

Let us first dispose of the false argument of fees versus commission as

this suggests that one method

is better than the other when an adviser is being rem-

unerated for his advice. In future, it is important that we consider fees

and commission as options either on their own or in combination.

There is no doubt that the introduction of stakeholder will be recognised

in the future as the major catalyst in the reduction of commission levels

generally. This should not give the impression that I consider IFAs to be

overpaid for the tasks performed – far from it – but there are situations

where excessive commission is being taken by a substantial number of IFAs .

If IFAs are to prosper, they need to control their costs, avoid costly

errors and, last but not least, make a profit.

Traditionally, IFAs have concentrated on product selection and purchase as

the key elements of their service. This will no longer do as the cost of

purchase continues to fall and the easy status distinction brought

to the market by polarisation disappears to be replaced by a greater

emphasis on caveat emptor. So, for independence to be easily evidenced,

fee-based advice is the most sensible way forward.

Before we rush headlong into this move towards fees, we need to make sure

that the services we are providing are what the customer really wants. Most

clients would probably cite the following as the missing elements in our

services at present:

l Lack of clarity in terms of provider communications.

l Limited hours of opening.

l Flexibility in contracts in words but not in practice.

At present, many customers find information from product providers is

rarely summarised in an understandable format, unless the IFA collates and

summarises it.

I remain unconvinced that people want to pay their bills in their pyjamas,

despite Robbie Coltrane&#39s protestations. The concept of 24/7 leaves me cold

but a service available from 10 to 10 does have obvious benefits.

The prime reason most clients use an IFA is to avoid bias. So, involve

your clients in the process by asking them what they are looking for and

grade those clients depending on the level of service they require. In many

cases, some clients will be unsure as to what you can actually provide.

At the same time, look at your business with a critical eye and map your

processes to see where unprompted value lies and opportunities for

cost-cutting exist.

When the Fees Toolkit was designed, we recognised that many advisers would

be unsure how to set their hourly rates in a way which avoids a rapid drop

in turnover. Which neatly brings me to the point of the benefit of a phased

move to a fee-based operation.

The toolkit allows you to determine the correct hourly rate at each level

for the firm&#39s principals, advisers and administrators. The system also

takes account of your fixed costs, the profit target for the firm and the


of time you have to sell.

In addition, it splits your time into admin and advice, with a lesser rate

for the former. Most important, it takes into account the level of recovery

to allow for jobs where the time on the clock cannot be charged if the


is to be retained.

The Fees Toolkit is not rocket science but it is set up

in a way which saves you time and allows your individual stamp. Whatever

your stance, the toolkit will either move you to fees or, at worst, enable

you to spot your profitable clients accurately.

Robert Reid is director of Syndaxi Financial Planning


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