Should you be increasing your fees?

We recently hosted a webinar for over 150 advisers on the frequently debated topic of adviser fees. There were some great insights from our guest speakers and the participants. You can access the full summary by clicking here. Professional Adviser also ran a feature showcasing the most debated points from the session.

To set the scene, according to the FCA, the average adviser charges 2.4% initial and 0.8% ongoing. The regulator also reckons that 75% of adviser revenue is derived from ongoing charges. We asked a number of poll questions during the session so scroll to the end of the summary for some useful data points on charging structures, average ongoing fees, minimums and tiering fees for larger clients.

When it comes to setting fees, one participant cited Brett Davidson (FP Advance) who reckons advisers should be aiming for 25% net profit margin, after you’ve paid yourself a proper salary. If you’re not doing that, he believes you need to raise your fees.

 

Other top tips from advisers

  1. Don’t commit to a fee level in the initial meeting as you need time to reflect on the amount of work required.
  2. It can help not being with your client when they see your proposed fee – this removes anxiety on both sides (the adviser isn’t anxious about being rejected and the client isn’t anxious about being forced to accept).
  3. Get a colleague to send the fee proposal, the prospective client is less likely to try to barter with an unknown 3rd party as opposed to the adviser they have formed a connection with.
  4. If you do get a client that asks for a discount – respond with “Of course, but which part of my service would you like me to remove?”

Are you charging enough? There were 3 quotes from advisers that stuck with me after the session

  • “Many advisers are chronically undercharging”
  • “Be confident. You’re often saving clients 3x what you’re charging”
  • “Advisers have the power to change people’s lives. Charge for that accordingly”

And yet, the trade press suggests that only 1 in 7 advisers have increased their fees to offset inflationary pressures, especially that of higher staff wages. I think advisers might be the only profession that hasn’t raised their fees in the last 2 years. This is especially relevant because 1/3 of advisers think their turnover will drop this year which means a bigger blow to profits.

To revisit Brett Davidson, his statement “If you doubled your fees would less than half of your clients leave? If so, you should do it.” is often cited by proponents of fee increases. I don’t think any advisers will be doubling their fees any time soon but it appears that our attendees bucked the broader trend. 55% of respondents had increased their fees over the past 18 months. And crucially, 95% of those who had increased fees had not lost a single client as a result.

This links neatly into the white paper I wrote on “The Value of Advice” that I have recently been presenting to hundreds of advisers across the country as part of the PFS Autumn roadshow. I firmly believe that, once you’ve convinced your clients of the undoubted value you add, the topic of fees will quickly become a non-issue.