Financial Planning to reach new levels

Financial planners should offer clients a choice of service levels and charge accordingly, says ThreeSixty national development manager David Fox.

"It is not so much a fee versus service situation, but how much the adviser should charge and what services they provide for a fee," he says.

Fox says the styles of service a planner provides at present are basic, sophisticated, oversight and intimacy advice.

The basic service captures a client's current financial situation, understands their needs, assesses their attitude to risk and implements a plan. With sophisticated advice, the planner needs to look at the client's tax structures, social security implications, estate planning and superannuation needs. The oversight advice involves maintaining frequent monitoring and reviews and intimacy is about knowing the client and providing financial therapy.

Fox says in the future, basic advice will be automated. Sophisticated advice will still be handled at the adviser level and oversight will be a mix of adviser and automation. Intimacy advice will always be adviser-based.

In the past, clients were willing to pay for advice, oversight and intimacy, he says, but the arrival of automated services means they will pay less for advice and oversight. Intimacy advice attracts the bulk of a planner's fees. Fox predicts that by 2002, clients will only want to pay for intimacy advice.

"There will be a lot of pressure on fee-for-service as a lot of services will be on the Web," he says. "The intimacy area is where planners get real value for advice."

Fox says planners in future will have to package their services and vary the options to suit the service being offered.

The packages can be divided into two, the initial service and ongoing services.

The initial service would provide a one-hour consultation, a documented financial plan, a one-hour financial solutions consultation, establishment of an investment portfolio and the planner's personal financial management pack.

The on-going service is divided into three sub-packages designed for the basic financial core package, informed investor package and priority investor package.

The financial core package offers services such as 12-monthly portfolio review, newsletter, and a six-monthly portfolio management report.

The top-end service package is the priority investor package which offers a comprehensive range of services that includes valuation reports at any time, research, six-monthly portfolio reviews and unlimited use of an investor helpline.

The informed investor package is a mixture between the two packages.

Setting a fee-for-services requires the planner working out their expenditure-to-income ratios, Fox says.

They should identify the profit they wish to achieve and from this work out what they need to charge to obtain their initial revenue, which is about 40 per cent of the total.

The income from on-going fees should be about 60 per cent of the planner's revenue.

With this information, a planner can implement the new pricing and service packages, Fox says.

"The introduction of the new packages and prices should be to a small, initial group of about 10 clients that will offer the least resistance to the new pricing structure," he says.

"The planner should give an explanation of the value being added to the service."

The larger group of clients can slowly be introduced to the change and Fox says this may take a couple of years to achieve.