An IFA's key consideration if switching to fees will be whether the existing client list provides co...
An IFA's key consideration if switching to fees will be whether the existing client list provides cost-efficiency and strong profit potential, rather than complexities of actually making the move, says information produced by 1st Software.
As well as explaining the difference between fee-charging and fee-based advisers, 1st Software points out that classification of client lists is likely to be the most important factor of any business restructuring, as different types of clients might be better served - from the point of view of the adviser - in different ways.
In particular, intermediaries will have to make the difficult decision to 'clean out' of those clients who are likely to lose a firm money or will be less cost-effective than the bulk of business potential.
"Decisions have to be made about which clients to retain and provide a full service, those to offer a lesser service or a multi-tie facility, and those best to let go."
Once client records have been sorted though, the company's infrastructure will dictate just how much fee-based business is possible and what type of fees need to be charged.
For example, says 1st Software, value-based or 'management' fees are levied at portfolio work, retainers could lock the client in under a membership fee, while other work not covered would need to be charged, for projects such as special reports.
Reorganising the business should make activities more efficient but allow the same group of advisers to manage several streams of business potential and adapt fee-charging to suit each category of clients.
For more information on to move to a fee-based practice, click on the Resources and view the full 1st Software document.
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