Simon Olive, Management consultant Axa Management & TrainingFirst, commission is an appropriate payment mechanism for those clients who simply want to buy product from you. It is less appropriate for those who want general advice and/or an ongoing service and relationship.Twenty years ago, fatter commissions and lower costs may have enabled advisers to subsidise a commitment to service on the back of an initial commission but this is no longer the case. Increasing costs and reducing commission means subsidies do not exist in most instances. However, clients and prospects will only pay fees for work that they truly value. Therefore it is critical that you appraise what value you do and can add. The best way to do this is to ask clients directly. A questioning track could be as follows:What are you looking for from a quality IFA?Why is that important?What would it mean to you to get that support? In addition, you could ask them about their past experiences of financial advice – what have they liked and disliked and why? In the majority of instances, clients / prospects will say they are looking for one or more of the following from a relationship:TrustPeace of mindSave timeMake money/save moneyFamily security,Proactive consultative relationship. The answers will highlight how you can deliver that value to them. Often a client will allude to a concern about being sold to or being put under pressure to buy. You could suggest that the need to sell something to earn a living could cause suspicion or friction, which is not healthy to the effective working relationship between a client and adviser. To gain the peace of mind that most clients seek, the best solution is to pay a retainer/fee. They can then trust the impartiality of any advice as you do not have to sell to make a living. If the advice requires the purchase of a product, they can choose to have the commission or trail income used to offset the fee but that is in their control. Finally, the pricing of a fee is key. I do not advocate the commonly used approach of hourly rates.I recommend using fixed and value-based pricing as being in the best mutual interests of you and your clients. A topic for another day. Geoff Mills, research & financial consulting director, Rayner Spencer MillsDo not make any rushed decisions in remodelling your business. Assuming that you are looking to maintain your independent status, then under the new rules you must offer the option to pay by fee. The new initial disclosure document needs to be in place from the date of your decision on depolarisation or, at the latest, June 1, 2005. This change means many IFAs need to reconsider the whole area of remuneration. There are two key issues which need to be examined – how this change will affect clients(both existing and new) and how it will impact on business (balance sheet annd cashflow). The extent of the impact in these areas will depend on the existing business mix and model. If you are advising business clients or deal mainly with referrals from your professional contacts, then these clients will be used to fees and will not find your transition too difficult. In introducing your client fee, set your hourly rate after researching the hours spent on client work. Benchmark this against some competitors. A trial run with some long-standing clients will iron out any problems and give greater confidence in future presentations. Protection business will continue on up-front commission so your mix of remuneration has been achieved and this will help with your cashflow during the transition period. On single-premium bonds and mutual funds, negotiate with your key suppliers for a lower initial with a fund-based trail. This can be done on a phased basis to build up your renewal commission but protect your cashflow in the short term.In positioning this with clients, emphasise the ongoing nature of your relationship and that trail payments are there to reflect the long-term nature of their investments. Most important, ensure that you do review the business. This approach also applies for personal and stakeholder pensions, annuities, etc. A slightly differing approach will be needed for legacy business. Consider using one of the fund supermarkets to re-register mutual funds, securing trail commission on those funds under management.This could be done at client reviews thereby phasing the additional workload and client meetings. Finally, use the new payment menu to your advantage. You will need to show both your fee and commission options, with your actual maximum commission set against the “market average”. Stress the value of your advice, service and review proposition and continue to develop a balanced and rewarding business.