Here’s a simple strategy for getting paid fairly for the work you do as a professional….every step of the way.
When you think about it there are broadly three possible parts to any client project:
2. Implementing recommendations
3. Monitoring & Servicing
You could paraphrase these three steps as “Eat; Pray; Love”
Not enough financial advisers value themselves sufficiently to be confident of charging fee’s at the outset of a client engagement – yet that is how you ensure that “eat”.
When a client engages an adviser both parties should recognize that there is immense value in providing an objective assessment – a plan – for the client. The client is then free to do as they wish with that plan once it is delivered, however, value has been provided whether the client chooses to use the advice or not.
Think of it in terms of seeking the professional expertise of an architect. The client engages the architect to assess their situation and the environment; the clients’ needs, desires and objectives; and try and balance all of those factors within the parameters of the clients’ resources. The result is a plan for the construction of a building for the client, within the client’s budget. It may or may not actually ever get built….that is ultimately the client’s decision. The architect cannot really do anything about ensuring that the client follows the advice, or the plan. Nevertheless, the architect has used their time, expertise and skill to devise a suitable plan for the client. And the architect deserves to be paid fairly for that.
Financial advisers do exactly the same thing all the time – and then give it away for nothing (or next to nothing). And there is often no obligation on the part of the client to engage in any further work with the adviser after the initial plan is delivered.
By not charging for your time, skill and expertise when you provide the Plan you cannot “eat” as an adviser.
The second possible area of work that an adviser may be able to do for a client is the Implementation phase. And this is where an adviser will often work on commission, or a success fee, or variable project fee….this is where you “pray” that the work can be completed and you can get paid.
Lastly, a financial adviser can be rewarded for an entirely different type of work on behalf of a client – that of providing ongoing service and support. Or “love“, if you follow the whimsical analogy.
Putting the three possible parts of a project alongside each other, together with how an adviser might get paid for each quite different piece of work, becomes a very simple way of explaining one’s remuneration basis for a particular scope of service.
In explaining the possible range of work to a client it is important to highlight that the client has the option to disengage, or walk away, from any phase of the work. There is no obligation for a client to engage fully in all three areas of work that an adviser may provide….but that does not mean the adviser should not be paid for that initial piece of work.
Following the provision of a plan, should the client decide that they wish to engage the adviser to implement any recommendations that arise from it then it is effectively a new engagement. Some advisers will charge a fee for this aspect, but many more prefer to work on a success fee basis. For example, if a plan contained recommendations regarding income protection insurance then a client may ask the adviser to arrange that for them.
The adviser then undertakes to complete the paperwork; compile the financial, employment and medical information on behalf of the client for the insurer; liaise with underwriters and chief medical officers; arrange payment and/or payment facilities; adviser the client upon the taxation implications of the cover; check policy schedules and documentation for accuracy; and anything else that may arise during the placement of the cover. Implementation can be a protracted business taking many many hours on the part of the adviser over a period of months.
Once the cover is placed (for this example) the client has the choice of thanking the adviser and walking away. The adviser will have been paid for this work either on a contingency fee basis, or a commission basis, or a blend of the two. But getting the recommended actions put in place on behalf of the client involves a strong element of “praying” by the adviser….it is usually not a guaranteed success.
Finally, the client may wish to have the adviser provide ongoing service and support. The adviser does in effect promise to “love” the client account from that moment forth, in sickness and in health, until the two shall part…..at a price. That price may be determined as asset-based fees, trail commission, agreed service fees, or a flat annual fee each year….but the “love” comes at a price, which the client can choose to pay for, or not engage in.
Accurately positioning the different projects that an adviser MIGHT undertake for a client, whilst providing the client with full choice regarding what the adviser does for them, is excellent business.
It also ensures that each possible type of engagement attracts fair pay for the work being done at that point. The model of “eat; pray; love” ensures maximum client choice in the scope of service whilst ensuring that advisers do not live on hope, or prayer, alone.
© 2012 Tony Vidler. All rights reserved. All materials contained on this web site not otherwise subject to copyright of other parties are subject to the ownership rights of Tony Vidler. Tony Vidler authorises you to make a single copy of the content herein for your own personal, non-commercial, use while visiting the site. You agree that any copy made must include the Tony Vidler copyright notice in full. No other permission is granted to you to print, copy, reproduce, distribute, transmit, upload, download, store, display in public, alter, or modify the content contained on this web site.0