A business consultant has spoken out against the hourly rate remuneration model, saying advisers opting for this approach post-FOFA are rewarding inefficiency.
Strategic Consulting and Training (SCAT) managing director Jim Stackpool told ifa that the premise underlying an hourly rate remuneration model is “worse than [a commissions-based model]”.
“[This model] rewards inefficiency and rewards hording of work and pegs an adviser’s entire value proposition to their hourly rate,” he said.
“If you’ve been giving financial advice for fifty years you might be able to do something in half an hour that adds more value than your hourly rate.”
“The hourly rate is as dead as the retail bookstore.”
Stackpool, who consults to financial advice practices on a range of management issues, rejects the idea that the hourly rate fee-for-service model has worked for other professions and is therefore right for the advice industry.
“The more progressive accountants and lawyers are abandoning this model anyway,” he said.
He advises that businesses adopt a hybrid model, providing a flexible annual retainer for long-term clients with an ability to offer one-off fees for one-off transactional services.
“We have a strong preference for job-based pricing – we think that’s the future of advice,” he said. “Advisers need to help clients manage their behaviour, not just their money to really help them reach their goals.”
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