Many financial advisers transitioning to fee for service will eventually arrive at a flat fee advice model, not an asset based fee model, according to Elixir Consulting.
Elixir MD, Sue Viskovic, acknowledges a recent study from Investment Trends, which points to a growing preference by advisers for asset based fee models (see: Strong Trend to Asset Based Fees…). However, Ms Viskovic contends this shift to asset-based fees “… is indicative of the fact that shifting straight from a commission model to flat fees is a quantum leap for many advisers and their clients.”
Positioning the asset based fee model as a stepping stone to flat fees, Ms Viskovic says her firm is seeing evidence that advisers who are new to the industry and those who have already been charging asset-based fees for some time are now thinking in terms of flat fees when they discuss fee for service:
… growth in the use of flat fees will be significant in the next few years
“We predict that the growth in the use of flat fees will be significant in the next few years,” said Ms Viskovic, who maintains that many advisers are beginning to choose flat dollar fees after they have conducted a thorough analysis of the pros and cons of the asset and flat fee options:
“Many are now commenting that if they’re going to do all of the work required to move to fee for service they may as well do it completely – especially if there is some risk that asset-based fees may be out of favour in future” added Ms Viskovic.
As well as the mindset of advisers, Elixir says other, more practical, impediments to using flat fees to date have included:
- A lack of administrative functionality
- A lack of knowledge, tools and support to assist advisers with how to construct a pricing model
Ms Viskovic is set to address the second point above, with the impending launch of her “Pricing Advice” consulting program (see: Fee For Service Business Tool), while other providers are launching fee for service business model programs, such as ClearFlyte.
