Charging fairly for advice

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Whether you’re a communications consultant, a financial planner or any other adviser who earns their income from expert knowledge, fees are always a fraught question.

It can be a challenge to fully demonstrate the value that has been provided through expertise, experience and knowledge, and charge accordingly. While financial planners are struggling with this at the moment, they are not alone. How to charge and what clients need is an issue that occupies the minds of most professional advisers.

Fidelity International recently released a report “The Value of Advice” based on a survey of over 2,000 Australians, looking at financial advice and how it should be valued, from their perspective rather than the profession’s.

It showed that people are looking for a wide variety of services and approaches from planners, and one of the main findings was that “trust” is one of their top requirements – ranking above ‘transparency in fees’ and ‘affordability of fees’.

These findings come on the back of significant changes in the financial planning profession which has been forced to change its income structure and look at alternative approaches.

And it is not just the fee approaches that advisers have been reviewing; it is also the range of services that clients may be looking for, the variety of potential clients there are, and the particular problems they face.  Balancing what is best for clients and the income sought by advisers is not easy.

In our own communications business we have developed an approach where we seek income only for the consulting hours actually worked rather than having a set retainer, which is the more general approach. We believe this avoids the pitfalls of underservicing and overcharging.

No matter the profession, as long as advisers are achieving what they have promised, and clients have trust in the advice, cost is not always the most important aspect. Some people will always go for the most expensive, some will always go for the cheapest, some the largest, some the smallest.  There is a place for everyone.

The Fidelity report shows that with financial advice everyone has different needs, relates to money in different ways, and is looking for something different in an advice relationship to help them navigate to their goals.

It also showed many people are looking for a relationship – they want to build a rapport, they prefer to talk with their adviser in person, they place most value on trust and an understanding of them and their circumstances.

But no matter what the special circumstances, needs, or problems are, or the industry an adviser operates in, one factor holds true. Trust is fundamental in any relationship if advice is to be accepted.  No client wants to feel that the main pillar on which a relationship is built is solely their ability to provide the adviser with fee income.