Planner fee models need to be FOFA ready
Financial advisers have been urged to remodel their fee structures now to allow them to have their new pricing models up and running by the time Future of Financial Advice (FOFA) legislation takes place on 1 July 2013.
Elixir Consulting has released the second edition of its Adviser Pricing Models Research Report, and managing director of Elixir Sue Viskovic said over half the advisers in the 433 financial advice businesses surveyed estimated it took them over six months to create their pricing model.
Ninety five per cent estimated it took them a year or more to implement it, meaning that for financial advisers who are still refining their model or are yet to create it, "our message would be to start increasing their focus as a matter of urgency", she said.
More advisers are charging fees now compared to when the first edition of the research was released in 2009, while many are just now refining or determining their pricing models, Viskovic said.
The research found that financial advisers who undertook a robust process charge 27-30 per cent more than those who did not apply a robust process to their fee model - suggesting that advisers who did not put adequate time into their charging model may be undercharging for their services.
"It is of concern to note that if advisers don't price effectively, they may charge too little for their advice - which will have disastrous long-term consequences on their business sustainability. It's important to invest the time to do it properly," she said.
"We would counsel against a business simply copying another's pricing model and implementing it, however, sharing ideas, experiences and understanding different fee structures has proven to be very helpful to many advisers," Viskovic said.
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