If you are a financial adviser, you will know that the best way for you to be spending your time is on client work that will earn you an income in a way that adds benefit to your clients. This benefits the client in that they build a trusting relationship with you and you are maximising your time by spending it on fee earning (or commission earning) work.
How much of your day do you actually get to spend, or in some cases do you use to spend on these tasks? In reality I find that financial advisers are distracted by other work which may be necessary to do but may not be necessary for them to do. This work could be done by paraplanners as it is mainly either pre-advice work that falls under the remit of a paraplanner, or administration which could be done by somebody else. The question then comes out from a commercial aspect, are you busy enough to justify paying somebody else to do the work. While the answer to that question really boils down to how much time you want to spend building your future income streams and, for some it may also be a lifestyle choice where people simply do not wish to work all the time.
The costs of employing people these days are high, along with the employment requirements that go along with it. There are alternatives though hiring people on fulltime contracts and an increasing marketplace is to outsource work from your firm to other professional independent firms that will manager the administration and paraplanning fully. There are several of these emerging and one is called paraplanning outsourcing sector and the benefit of this are that you can pay for work when you want to and not have fixed cost coming out of your business which financially may not be sustainable in the long-term. If you would like assistance with managing paraplanning or advice paraplanners then please contact as at Noble McCall and we will be happy to assist you.
Financial Advice: What is a fair fee?
The RDR has been very specific in this requirement for you to justify your fees as a financial advisor to your clients. So what is a fair fee? The FSA cannot tell you what a fair fee is that you should be charging your client as this is not in their remit but they can ask you to justify fees that you are charging. Obviously this then brings it in a way under the jurisdiction of treating your customers fairly.
Pricing is a sensitive subject. Historically there have been two pricing models which have generally been dictated by the insurance companies, this will not be the case in the future and it move down to you to decide on your pricing scales. I would suggest a fair fee should comprise the following main components:
• It should be justifiable when scrutinised
• It should be flexible if required
• It should cover all of your costs and have a profit margin added to the fee
• It should recognize the quality of work and level of advice that has been provided.
All of these things sound obvious and you might take them for granted but in truth in the past perhaps it had simply been dictated by the fact that if recommending a particular product, the income would be dictated by the commission offered but not necessarily take into account any of your own and your firms costs directly, it was a simply a case of take it or leave it.
How will your customers pay for your advice?
Customers will buy based on a number of factors:
• Their need for what you are recommending
• Their judgment of your ability to deliver what you are proposing, both now and in the future
• Their past experiences
• The quality of your explanation of the service that you are providing.
Most clients do not understand at the time of purchase, because they do not have time to think about it, they paying for your knowledge and experience. We are moving to a world where many products are similar and distinguishing features are few and so they are buying you. This means they are buying you and your history which means that you need to explain properly about yourself in a way that helps the client understand the quality of the work that you are offering and builds trust.
Clients who have paid low fees in the past will expect to pay low fees in the future. Clients who have paid high fees in the past would be happier with high fees in the future. The difficulty comes when you try to move a client from a low fee paying environment into a higher fee paying environment. This will be hardest task for financial adviser, you therefore need to have the background of quality of workmanship and the genuine belief in what you are delivering to prove that the client is justified in paying the fee that you are proposing. This may include ensuring that you have sufficient administration, paraplanning tools, paraplanners and research tools available to your firm to enable you to do this.
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