Client assessment required for switch to new fee structures
Independent financial planning practices concerned about moving away from a commission-based fee structure should speak to clients individually to work out a case-by-case solution, according to financial strategist Lap-Tin Tsun from E+W Strategic Partners.
Speaking at a Financial Planning Association (FPA) discussion group in Sydney, Tsun also emphasised the importance of implementing changes before the July 1, 2012 deadline.
Each of the available fee models — time based, asset based, fixed price, risk sharing and hybrid — has its own advantages and disadvantages, but the most important thing to keep in mind is that regardless of the practice there will not be a one-size-fits-all solution, Tsun said.
“A move to fee-for-service means more than just changing remuneration models,” he said.
He recommended practices perform a review of their business to assess what types of clients they were targeting and whether the platforms and processes they had in place were sufficient. Only then can the business determine which fee models are appropriate, Tsun said.
Practices also need to be able to explain their services to clients in a way that they understand, he said. “It’s no good listing 20 services that you [provide] if your clients don’t understand what they are,” he said.
The change in fee structure will provide planners with an opportunity to segment their client base, and to be more specific with their clients, he added.
It is also important to remember that there is help available for planners or practices who desire it in the form of workshops, other educational opportunities and specialist consultants, Tsun said.
Recommended for you
Net cash flow on AMP’s platforms saw a substantial jump in the last quarter to $740 million, while its new digital advice offering boosted flows to superannuation and investment.
Insignia Financial has provided an update on the status of its private equity bidders as an initial six-week due diligence period comes to an end.
A judge has detailed how individuals lent as much as $1.1 million each to former financial adviser Anthony Del Vecchio, only learning when they contacted his employer that nothing had ever been invested.
Having rejected the possibility of an IPO, Mason Stevens’ CEO details why the wealth platform went down the PE route and how it intends to accelerate its growth ambitions in financial advice.
