AFA 2017 National Adviser Conference

Don’t Underestimate Clients on Advice Fees

Advisers can charge a fee for life insurance advice but need to be aware of what it costs to deliver the advice and structure their services accordingly, claims Western Australian adviser, Mark Rando.

Rando and Associates Senior Adviser, Mark Rando

Rando and Associates Senior Adviser, Mark Rando

Addressing delegates during a Focus Session at the 2017 AFA National Adviser Conference on the Gold Coast, Rando, senior adviser with Rando and Associates, said he had struggled to work out what how much he should charge for advice, which clients should pay fees and how they should pay his advice fee.

“I was a disbeliever and felt this was not for me and would never work as clients will not pay fees for advice,” Rando said, adding that what he was charging and the service being delivered was not consistent across the board.

Rando also said he struggled to work out what fee he should charge, which clients would pay for it and how it would be collected from clients but once he began using a fee model the typical client response was ‘what type of service do I get for that fee?’.

He said to get to this point he had worked out what each part of the process would cost and the time required to get new business on to his books and built a pricing model from that point.

“We find many clients are unable to articulate what they want and we have to educate them…”

“We worked out our fees based on what its costs to keep the practice doors open per hour, which was our costs divided by the time we are open per week, which in turn gave us an hourly rate and the business has to make more than that per hour,” Rando said.

“At the welcome stage with new clients we work out what kind of relationship they would like to have with us and why that would be valuable to them. We find many clients are unable to articulate what they want and we have to educate them about our value and what we do,” he added.

“We do this because clients won’t sign an advice agreement or pay a fee if we can’t show we know what we are doing or if they don’t know it either,” Rando said.

“Don’t ever be surprised and assume what clients are prepared to pay, they will tell what they are prepared to pay depending on what is important to them,” he added.

“Don’t ever be surprised and assume what clients are prepared to pay…”

Based on this approach, Rando said he priced each stage of the advice process and has a frank conversation with clients about how his practice is paid for advice.

This includes a fee for a Statement of Advice that is charged up-front because clients may not return to implement the advice as well as fees around implementation and ongoing service, where Rando overs a range of service packages.

“As such, a client can have no product with us at all but can access a review of existing products they have already,” he said.

“They see the value we provide is having us stand behind the family when they may need it most, and it is not about selling a product,” Rando said.

  • paulkate72

    Mark is clearly a switched-on adviser and what he says make a lot of sense. It’s no surprise that he’s successful.

    • Mark Rando

      Really appreciate your comments….thanks..

  • Jeremy Wright

    Mark, you are perpetrating a perception that does not exist.

    Please pull me up if I am wrong, though you appear to provide a holistic full Financial Planning advice service for your clients, which of course creates the opportunity to build in fees, as it is a total package that every person strives for and has an interest in.

    What you are missing with your statement, is the truth around what clients are “Actually” prepared to pay for, with regard to the provision of Life and disability advice and products to meet their needs and you will need to clarify how clients are willing to pay for all the work involved around this Best Interest duties work, which is thousands of dollars upfront for a practice to break even.

    We have heard nothing from anyone to date that properly answers this, as after all, it is the client that pays and it appears they seem to have been left out of this debate from the YES crowd.

    • Mark Rando

      Ken, a height percentage of my client’s are risk only and they pay a fee. We have also completed risk only business with nil commission. Client’s do pay.

    • Mark Rando

      Jeremy, Not sure what you are getting at here…I certainly do have clients that have asked for a nil commission business….life/ tpd/ trauma and ip.
      While I do offer full
      planning a high percentage of my client’s are risk only. It does work.

  • Ken

    There seems to be a lot of consideration on options ideas thought processes etc which leads me to think that Marks business is a process of numerous options and products not just risk ?
    If not and you have found the “silver bullit ” to this age old problem congratulations the risk world is at your feet
    However if the fee is an overall charge for retirement planning ,Super investment , cash flow projections etc etc with a bit of life and IP thrown in then it’s still congratulations but it’s not fixing that old age issue that people will not pay for life insurance advice on its own.
    I recently tried a new strategy with a client who was told by a bank they could do an SOA for him for $4000 I would assume that included a fair bit of holistic planning for that cost ? However it was only life cover he was interested in and some income protection options for his personal needs
    I advised I could do an SOA based on his requests for $1500 he told me for $1500 he would research it himself
    40 years I’ve been trying this and I just do not see how people can say they have found the answer without “colouring” the reason a bit ??

    • Mark Rando

      I have client’s who pay a fee for insurance only advice….higher percentage of my base Ken.

      • Ken

        Hi Mark ! These clients that pay a fee for your service and are advised in the SOA that it is a fee not a commission are they paying the same fee every year ? We know that we can charge a fee say through one path that drops the premium considerably if there is no commission enabling you to add a reasonable fee for all that hard work That’s fine ! But again do they pay that same fee every year or do they get a reduction until more work is due to be undertaken because of a change ?
        Agree the fee side could be very valuable and far in excess of. 20% renewal ?
        If ongoing ??

        • Ken

          Ps and no claw back !!

          • Mark Rando

            Ken, I appreciate your interest. I’m more than happy for you to call me directly because honestly it works…..I was I massive doubter but now have to say I was wrong.

          • Mark Rando

            Ken…I also have claw back sorted if a client opts for commission.

          • Ken

            Love your enthusiasm ! and I’m sure you have a great system in place that works for you
            Nothing quite like a good ” banter” late at night
            One thing you have done is make me think a little further into the commissions vs fees setup and in the next month or so with s good calculater and some well invested time I will try and work out a plan that works for us ! Like you seem to have arrived at
            Good luck with it all and hope to “banter” again soon

            Regards
            Ken

          • Mark Rando

            No banter Ken…I’m always happy to share and my solution works for me but seems to have been accepted as food for thought. As I said, I’m happy to discuss as over email context can be lost but I do believe I can help advisers how to improve our businesses and industry….happy for you to ring me….glad I have prompted you to consider my opinion….all the best mate and at least you are open to change.