Advisers need to price their intangible value
Adviser fee pricing is multi factored and advice practices should put a price on their intangible value, according to a financial advice consulting firm.
Speaking on a pricing webinar, Peloton Partners chief executive, Rob Jones said adviser fees came in three layers – intangible value, services and advice, and structural complexity and additional value-add.
Jones said intangible value was the investment the client was making for their future and it was about identifying goals, and elevating those things to give them their version of financial success but that it needed to be distilled into a price.
“I'd charge the client the whole fee on this if it was that important for them and whatever the other services as this is important,” Jones said.
“The second batch, of course, is those physical things – the moving parts relatively easy for us to be able to price in a pricing framework. But every single firm is different because their costs and their client profiles are different.”
The third area to price, Jones said, was the structural complexity and additional value-add areas which were things that clients did not need all the time such as estate planning.
“To be able to view a client through a matrix like this allows you to remain in step with clients and allows pricing to remain in step with the challenges of your business as well,” he said.
Source: Peloton Partners
When asked whether it was ethical for a more experienced planner to charge a client more for their service compared to a what a junior planner would charge for the same service, Jones said that would only be the case if they had a special level of expertise.
“The short answer is there is no difference. It's the firm providing the advice, and whatever the value is, it's going to the client. That value can be quantified and so be it and we don't just separate it out,” he said.
“However, there is an example of one individual’s expertise around executive share option schemes and it's deep. All we've done in that particular case is that we've allowed a higher fee relating to that specialisation. They are the only one in the organisation that's particularly strong in that area because of experience, but that's about it.
“Otherwise, ethics is not part of it. It's value, services, expense, training of advisers, profit margin, it's turning the lights on, it's everything else that is impacted, and a client should be no more or no less than what their circumstances define.”
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
