Recent research from IFA Promotion shows that 600,000 sensible people use one of the 52 white-labelled IFAP ‘find an IFA' search database. They are asked the question - how do you want to pay for the advice? Do you want an IFA who charges a) commission or fees or b) fees only?
The most recent figure shows that 20% ask for an IFA who charges on a fee-only basis. That’s a staggering 120,000 or more people every year seeking a fee-based IFA.
I’ve heard that fee-only IFAs are receiving so many leads they do not need to put any effort into seeking new clients and, in fact, some turn clients away or refer them elsewhere. Do I believe this? Of course I do, as IFAP’s marketing director has told me only 2% of the circa 9,000 IFA member firms addresses registered on the IFAP database are fees only.
I don’t think there’s anything wrong with commission while the providers still choose to pay huge amounts of indemnified cash. But they are all chasing the same new business – the way the industry has always done.
And the problem is that we generally give little regard to existing customers. No wonder the clients I am working with - who are seen to be treating their existing clients fairly - are finding the incremental business they receive more than replaces any lost new business.
Every sensible business person knows it is cheaper to gain new business from existing clients than to chase new customers. But our sales-led industry will never totally give up the macho buzz of bringing in new applications to hit imposed or voluntary sales targets.
A client of mine, Brett Davidson of FP Advance, has taught me a lot about how to build a profitable IFA business and when I marvel at what he advises I could kick myself for the years I saw IFA clients day after day. If only I charged on a fee basis when preparing the client a solid financial plan for life, and charged a fee for the thousand of pounds I saved some of the more financially fortunate clients in tax.
So what if clients who have been with you for years paying you on a commission basis may threaten to leave if you start to charge them fees? I bet you have made them thousand of pounds in growth or tax savings over the years.
If they do not regard you, as an IFA, on a par with their accountant, solicitor and - more increasingly expensive - their dentist, they are not worthy to benefit from your expertise.
So go on – bite the bullet! Go fees only. IFA Promotion will generate the HNW clients, as will your professional contacts, and Brett Davidson can show you how to do it successfully.
Kim North is managing director of Technology and Technical.
The views expressed are those of the author and not those of the company she represents.IFAonline
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