What prompted the decision to incorporate fees into the advice you offer?
What prompted us was, firstly, having clients that are committed to the advice we offer. We couldn’t afford to do the work we needed to do to provide quotes where they may or may not proceed – we don’t do any unpaid work now. When someone pays for advice they are committed to our advice and they value it and us.
We really wanted to step up our professionalism as well. We feel we have value to add and this was a good way of stopping the tyre kickers and helping people that are after advice from professionals. We didn’t want clients to buy us on price because they will leave you on price – we really want to have a long-term professional relationship with the client and be with them for the long run.
We also looked to other businesses that were already charging fees, like Mark Rando from Rando and Associates. We really liked his model, and with my persistence, he generously helped us create our version of what was working for him, his great team and his clients.
What challenges did you face when introducing fees?
Mentally it was trying to break 14 years of habit – that was very hard – and the fear of losing a prospect or the fear of offending someone. For me there was a lot of fear with it, but in saying that I had a client come in the other day and I actually was embarrassed because our fee was too cheap when we worked out what we were doing for them.
Most advisers are doing this for free at the moment with their fingers crossed that a prospect will turn into a client and they will be healthy enough to be accepted by the insurer and then get remunerated. We now get paid to do all the work before we even worry about implementing the cover, so it is a good thing that our advice is not influenced by the outcome of a sale and we are remunerated for that.
Overall, it has been a big transition with starting off with a lot of fear to now thinking we should be charging more because we add so much value to the client.
How has charging clients a fee affected the relationship you have with your clients?
The main thing is we now have clients that are engaged in the whole advice process. We are educating them more about stepped and level premiums, we talk to them about the whole suite of protection that may be required. Before, we were seen as a salesperson even when our recommendations were in their best interest. Now it is a relationship of us as the expert but we were an expert in educating them and involving them in the whole advice process.
Because clients are a lot more involved and instead of us just working out what they should have, I think it is going to be easier in future year to review and work ongoing with this newer clients, as we have started with a professional foundation and the client has helped with the process.
Have you had to review how much you charge a client on a regular basis since you first started charging a fee?
We haven’t changed it yet. We wanted to run for 12 months and then refine it.
There is a reason we chose our starting values, which was originally to cover the cost of the statement of advice from an outsourced paraplanning service. So the logic was, if we outsourced the statement of advice it would be $440, $880 or $1,100 for a plan and those figures were a big enough hurdle for me to start, but for us now in, I think, by the end of the year we will have completed a comprehensive cost to serve which will help us calculate a true cost to serve and the fee will represent that.
Do clients value your advice more now that you charge a fee?
Definitely yes, and I think I have changed my opinion of myself significantly in some way. I feel the way we handle or do business now is significantly different. Not everyone is going to proceed with paying for advice, and that’s fine. We now know that not everybody is willing to pay for advice, which is a frustration because we like helping people. But on the upside, clients that have paid the fee to have advice provided have proceeded with that advice or parts of that advice.
What has been your experience with other advisers and members of the industry since making this change?
The upside for me, as much as we have shared what we are doing, we have had a lot of advisers share back to us, I suppose, being open minded that this model suits us and it is not going to suit everybody. Some parts of it may suit them, but what I have seen and what has come out of the proposed framework is that advisers are looking to help each other more so than in recent years. So my thoughts on the industry are that everyone is coming together to share ideas to ultimately help clients. For me, everything we do has to be client-centric – a lot of the industry focus has been on remuneration, but I think for us it is always about client experience and making sure we are there to help them when they need it.
