How do you set your fee when so much of what you offer your clients is intangible?

Headlines:

• There is no right fee structure, just one that works for your business.
• There are a variety of charging structures all of which have pros and cons.
• Many of the intangibles can be bought to life by the use of lifetime cash flow planning.
• There are four key differentiators - products, distribution methods, different levels of service, different range of services.
• Know how you compete i.e. is it on price? are you a generalist or a specialist?
• 1% ongoing potentially under threat.
• Know the cost of taking on a client.
• Trust, peace of mind and continuity of relationship is key.
• There must be consistency of the charging structure through your business.
• Value yourself.

Key issues and challenges:

• Costs of running an advisory business are increasing and there is a possible downward pressure on fees.
• Certain charging structures will put advice out of reach of more people.
• If contingent charging isn’t right for DB transfers why is it right for other forms of business?
• Charging a fee for a plan and then implementation needs careful thought as if it costs more for implementation then advice it undermines the value of the advice.
• If your charging structure contains too many aspects it is confusing for clients.
• Should you also express a flat fee as a percentage?
• As the client demographic shifts you are possibly dealing with 3 different generations in the near future. How does your proposition and its delivery fit in?
• Believe in your worth/value. If you don’t your clients and staff won’t.
• Should you put a cap on your charges for larger clients?
• Migrating existing book to a new charging structure.
• Quoting a menu approach could be difficult under MiFID II.
• Communicating the intangibles especially to new clients.
• Is your pricing structure delivering the results you expect?
• Not getting paid for work purely on a contingency basis
• Currently clients are ok paying for advice/services but concerns are Millennials wanting everything for free.
• Don’t make your structure too complex and make sure you can collect it easily.
• Sometimes the business has to ‘sell’ itself especially if it is in a beauty parade and we may not be that good at this.

Conclusions and solutions:

• Establish a fee structure that is right for your business.
• Accept that trust and other aspects are intangible and can’t be measured but are highly valued by the client.
• Work to a plan that makes the clients’ money mean something to them as this makes what you do more tangible.
• A lifetime cash flow plan helps bring the intangibles to life.
• Cash flow modelling is key. Very difficult to advise a client without it.
• Make sure you provide your clients with useful, accessible information.
• Your charging structure should be sense checked to see if it is delivering the income/profits you expect and that you understand associated costs of taking on new clients.
• Review your touch points with clients to establish if you are in their view on a regular basis.
• Look at how you deliver your services and do you need to be more digital?
• Don’t give discounts in inappropriate places. Better to turn a potential client away than discount your fees.
• Believe in yourself and place the correct value on your offering.

Expert: Nick Bamford - Informed Choice, Tony Bray - threesixty, Alistair Callander - The Private Office, Gabriel Crayford - The Private Office
Facilitator: Martyn Laverick - Soprano Consulting