Charging fees at 'implementation' - or where a product is purchased - is a legacy of the distribution system and should be ditched, a financial services expert has said.
Many advisers are still charging according to an old distribution model where the first meeting is given for free and the majority of the fee is charged when a client purchases a product.
However, FP Advance chief exeucitive Brett Davidson has argued that adviser's new pricing structure should reflect the real value gained by clients at different stages of the advice process.
He said that the old pricing model makes "absolutely no sense whatsoever" in a world where advice is based around a relationship with a client.
"Charging at implementation is a product manufacturing model, and that's how this mechanism came about," he explained.
Davidson was speaking during a webinar entitled Getting pricing right once and for all.
He said that under the old model the provider would not pay for the first three stages of the process (initial meeting, fact find and analysis) because they could not be certain it would result in a sale.
But in an advisory world, where people have a relationship with clients, much of the value is in these stages and so the old model causes confusion for clients.
He said: "Value comes from asking questions, listening and demonstrating that you can solve a client's problems and it is important to spread the fee burden across these areas of the advice process."
Unsurprisingly clients report receiving considerable value from the initial meeting where an adviser helps them articulate their problem, but in many cases this is provided for free.
"In my view, if you do a great job up front you should charge for this work, and this will make sense to the client. It helps get that extra level of buy in and commitment."
In addition, clients reporting receiving so much value in the maintainance of an ongoing relationship that the traditional 0.5% charge may not reflect the real value of this service, he said.
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