Financial planning to reach new levels

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

Financial planners should offer clients a choice of service levels and charge ac-cordingly, 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, assess their attitude to risk and implements a plan. With sophisticated ad-vice, the planner needs to look at the client’s tax structures, social security impli-cations, 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 over-sight. 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.”

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 ongoing fees should be about 60 per cent of the planner’s reve-nue.

With this information, a planner can implement the new pricing and service pack-ages, 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.”