Is advice worth paying for?

As we find ourselves less than twelve months from the implementation date of the RDR, that may sound like a strange question to ask.

Surely by now all IFAs will have worked out that advice is worth paying for?

It does not seem that way though. There still seems to be a belief that advice is only worth paying for if it results in the implementation of a financial product.

Perhaps this state has been reached by virtue of the fact that this has been how the historic commission based approach works.

Advice and the implementation of a financial product solution have been inextricably linked. In order for the adviser to be paid (via commission) the client had to buy a financial product.

But surely advice can stand alone?

Of course it can and many practitioners have made a real success of creating an advice offering that requires no purchasing of a financial product solution.

Skilfully they have created a proposition that is capable of being articulated and one that is seen as valuable by the consumer. On delivery of the advice the client is then invoiced for the price of that advice regardless of whether or not they have had a recommended to purchase a plan.

An extended version of this would be the Financial Planner who produces a holistic financial planning report answering all those important questions around “will I have enough money during my lifetime?”

In my experience people will pay for this. Not all of them of course there will always be those who don’t really see value in advice.

There will also be those that we fail to convince and I remain firmly of the view that will be my fault. As I have repeatedly stated it will be my fault not the prospective clients if I cant convince them that what I have to offer is worth paying for.

The other day we did a presentation to a client who was very focused on the inheritance tax position of his very elderly mother.

A full and detailed analysis and a report explaining all the options and pointing out the advantages and disadvantages of any action was presented to him in a two hour long meeting. Whilst he chose to take some action this did not require him to buy any financial product.

IFAs who believe that advice is only worth paying for if the client buys a product would presumably have parted with that client on good terms but poorer in pocket. Why?

The client was charged a project fee and was quite happy to pay it even though no financial product purchase was necessary.

In my view it is a question of scale.

Someone with a complex situation and valuable assets will be prepared (usually) to pay more for advice than someone with simple needs, say the accumulation over time of a pension fund.

I don’t agree with the contention that clients wont pay fees for advice. In my experience they will it is just a question of scale.

I absolutely don’t expect someone with the capacity to save £200 per month to pay an advice fee of £980. But someone with £100,000 of invested funds will absolutely do so – as long as we explain to them the value of doing so.

Yes, advice is well worth paying for.

We have arranged two more dates for our popular Implementing the Retail Distribution Review workshops – Thursday 27th February 2012 in Cranleigh, Surrey and Wednesday 7th March 2012 in Wilmslow, Cheshire. Get your tickets now before they sell out!