I am thinking of using monthly retainers in my business. Does the panel have any views on whether monthly retainers are a good thing? If so, do they have any tips on how I should implement them?
Nick Cann, Institute of FInancial planning
Monthly retainers are generally a good thing if they fit with your business model. A lot of advisers have found that introducing monthly retainers has helped with the transition from commission to fees. They can say to their clients that they will offer an ongoing service for £x a month. People are used to paying for things like RAC membership in this way, so it makes sense to them.
It also helps advisers to identify whether clients are serious. Over the years, advisers can have built up 500 to 1,000 clients.The transition to a monthly retainer helps ensure that all clients are profitable. Advisers need to convince all clients that they are providing a service worth paying for and working on a monthly retainer basis may ease the transition.
It can also be less stressful than billing once a year. If you say to a client that these services will cost £600, they may question the value. But people forget £50 a month - just look at how many people go on paying insurance long after they need it. It makes it easier for clients to budget as well. People feel better with a monthly arrangement than one shock.
It can be part of an adviser's pitch to new clients. The adviser can work out how much time he will need to spend with a client, look at how many hours he would bill, take the whole lot and divide by 12 to get a monthly figure. The adviser can sit down with his client and review the fee level every year. They can discuss whether they have done more or less work than expected and can reduce or increase the level of monthly fees accordingly.
Also the FSA is forcing advisers to justify all their income. It is easier to do this using monthly retainers. It makes it easier to account for all renewal commission.
www.financialplanning.org.uk, Tel: 0117 945 2470
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brett davidson, fp transitions
Introducing a monthly fee or retainer is something many advisers consider. The most important thing to consider is where this fits into your broader fee charging or remuneration strategy. Just adding a monthly fee to your existing charging structure is likely to be seen as confusing or greedy. Replacing a commission-based charging system with a small monthly retainer (for example, £30 per month) is likely to see you go broke. Neither of these outcomes is desirable.
Everything starts with some simple business planning to identify:
What do I want from my business?
Which clients will I work with?
What services will I provide to them?
How will I present these services in a way that allows clients to see the value in them?
Having worked out the answers to these questions the last thing to work out will be what sort of fee structure will work best for both adviser and clients under this new business model.
A common mistake that I see time and time again in my consulting work with advisers is that they have not done enough work on these questions and are therefore unsure what to charge. In the absence of any clear thinking they decide to start cheap. This does not work.
The only time low fees work is when they are part of a business plan to work with low level clients where cost is a major factor in the purchasing decision. In this business model you would promise and deliver only a basic level of services to clients for a cheap and cheerful price.
If your business is moving to financial planning style advice and wants to position itself as a quality or premium service, the pricing must reflect that to send the right message to customers. What would happen to the Mercedes-Benz brand if all of a sudden they sold their cars for £2,500? The brand would be completely destroyed. We know that Mercedes-Benz stands for a long history of quality and premium performance. Therefore it is no surprise to be asked to pay the prices they charge for their cars.
The key to charging a fee or retainer is to package up a service that meets the needs of your target clients. Get that right and the pricing decision is so much easier to devise and implement.
www.fptransitionsuk.co.uk, Tel: 07917 152 124
MICHELLE HOSKINS, THE ADVISER PARTNERSHIP
The financial services industry is continuously changing and it is will become increasingly difficult for your business to be solely funded by commissions paid by the product providers. This historic approach to generating income for your business will undoubtedly cause a number of problems in the future. With this in mind it worth considering a move to a fee-based business model to maintain and grow a successful business. Within that, it is worth considering monthly retainers as a fee structure.
For a commission-based business the commissions received for the 'sale' are subsidising all of the other areas within the sales process that do not directly generate their own fees, these areas are usually non-regulated but nonetheless require your vast amount of experience, expertise and knowledge. The danger with this approach is that your service is only based around the commodity sale therefore no sales, no income.
In addition to this, as a profession, we continue to invest heavily in our businesses. We strive to be successful so spend large sums of money on new technology, back office systems and staff all of which aim to streamline our business processes and make us more efficient and more productive. This new way of working helps us grow our businesses but most importantly allows us to give a fantastic service to our clients; a service that I believe deserves to be paid for.
Moving over to a fee-based business model can be a daunting thought and many advisers rush into it without really giving it a great deal of consideration. Monthly fees are one of the best ways to ease clients into the new model. They will also ensure that the transition will not see your business suffer. For the transition to be successful you must have a plan, but do not be too put off as there are various means of support available to you. Contact the FSA or your own network for guidelines and advice. Plus there are a number of support groups that have been set up to guide advisers through the process of implementing fees using proven techniques, strategies and ideas.
It is as simple as this, by charging fees you will increase your income, which will allow you grow and drive your business in the direction you wish.
www.theadviserpartnership.co.uk, Tel: 01462 442 447
'Damage is done at the moment the pension is transferred...'
'Visibly trawling for prospective clients'
‘Effectively the norm’
20 years experience in multi-asset