More financial advisers are transitioning to a flat fee model for risk advice. This is one of a number of key findings revealed in the second edition of Elixir Consulting’s Adviser Pricing Models Research Report.
Released earlier this week, the Report details how financial advisers are charging for the advice they deliver, and how much. It also outlines the challenges they are facing when it comes to determining the right fee model for their practice and how they are overcoming those challenges.
Managing Director of Elixir Consulting, Sue Viskovic, told riskinfo that although insurance commissions have mostly been left intact by the Future of Financial Advice (FoFA) legislation, advisers are still using a variety of methods to charge for their advice and services around insurance.
Often, advisers find that [insurance] commissions alone are not the best form of remuneration
“One of the key findings in the report is that pricing insurance advice is incredibly complex,” said Ms Viskovic. “Often, advisers find that commissions alone are not the best form of remuneration – and the research report demonstrates a range of different pricing models; some that include commissions and some that don’t.”
Ms Viskovic observed that none of the risk specialists in Elixir’s research rebate commissions: “This strategy was an option more popular among financial planners working within accounting firms than those in stand-alone financial planning businesses,” she said.
The research includes details of the fees charged to clients for initial and ongoing advice support. It reveals that engagement fees charged for insurance-only advice, where the an upfront commission option was selected, range between $200 and $3,300.
The second edition of the Adviser Pricing Models Research Report outlines information collated from 433 financial advice businesses that represent a cross section of Australian advice practices.
Advisers and dealers interested to acquire the Report, which is only available in hard copy, can click here to contact Elixir Consulting.
I was at an adviser forum recently where one of the platform speakers proudly said that he rebated insurance commission and charged a fee with other other advice. He gave an example of a super roll over and replacing insurance with nil commission. When I compared my low fee for a relatively simple transaction and low fee for ongoing advice, which in effect is ‘just being there’, my low fee, but with full commission on insurance was lower on an ongoing basis than the fee for service and nil commission from this adviser. Which adviser is offering the better deal? This is an option that advisers who are good at insurance advice should consider.
There is a huge difference in what clients are prepared to pay for risk advise as a standalone service, or if the risk advise is part of a total Financial plan that includes Investments, Finance and budgeting.
If you want total clarity and the truth about what clients are prepared to pay,then ask them a simple question.
“How much are you prepared to pay for advise on your Life Insurance needs?
Many Financial Planners have not been honest with themselves when they state they charge a fee for Financial Planning advise, ( including Insurance advise)which in many cases they have cross subsidised the Insurance fee from the Finance,Investment and budgeting component of their advise model,which clients “are” prepared to pay for.
Clients pay for advise and services that interest and excites them.
Iam yet to meet a client that is overly interested, yet alone excited by advise on Insurance and the best result we have had when popping the question about how much would they pay for Insurance advise, has been a sobering reality check.
In other words,my outgoings would exceed my incomings and staff would have to be let go. Then I would close the doors,as working for a loss with nil income to me after paying the Business expenses, is not a attractive proposition.
It is a interesting exercise and I would be the first to charge fee’s proportionate to the time and expertise required to specialise in Risk advising.
The only thing that seems to stop me,is the clients are not interested in paying.
Jeremy and Mark are spot on ….if you are a pure risk adviser, try charging a client a fee commensurate with your time outlay when their insurance has been declined for health reasons…….you’ve got buckley’s.
Ignoring this, why would prospects entertain any fee for risk advice, when they are constantly told they can do it themselves, online, over the phone…..and pay ZIP
Of course, we know that the quality of the product is not the same, but the prospects really have……. NO IDEA
Sorry Elixir, I think you need to sample pure risk advisers, rather than financial planners trying to pull their business’s from the ashes of the GFC, over regulation and Industry Fund slurs…….. with an old “marketing ploy”.
I completely agree with Gary C, one of the issues that annoy me greatly is that the very same insurance companies are on TV 24/7 spouting do it yourself to clients, at zero cost in time or money, yet at the same time the insurance companies expect loyalty from us at the coalface. Trying to convey to a client you are going to charge them (for example) $2,000 for the time spent on their insurance needs, as well as the premium they have to pay, is very difficult. You would have to be a compelling salesman to do this. I have been doing this for 25 years and to be honest, i do not see any change occuring, all i see is companies like Elixir charging $1,999 for a booklet that has clearly been gleaned from practises that do not specialise in the Risk arena.
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