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.
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.
