Financial advisers are missing out on opportunities to create money by not charging a fee for service, argues US-based practice management consultant Bill Bachrach.
Mr Bachrach said providing advice for free in the hope of getting some of a client's assets is an “amateurish approach” and advisers should instead charge a fee for quality planning that “stands on its own merits”.
A figure of between $5,000 and $10,000 would be a good starting point, he said.
“If your spine is still under construction or the idea of charging an up-front fee for planning and developing your advice freaks you out then at least start with $2,000,” Mr Bachrach said.
“Just make sure that your fee doesn’t make you look like a weenie. [For example:] quoting a $2,000 fee to someone who has over $1,000,000 will make you look like a weenie. And don’t charge by the hour either. Charge for the value of your advice, not the hours it takes to create it.
“The bottom line is that you must have confidence that the work you do is valuable in order to expect other people to value you and your work. It’s business. Value is measured by money,” he said.
Mr Bachrach also pointed out that advisers are still not asking for referrals despite clients being willing to refer family and friends.
“My informal research indicates that most people have between 200 and 500 contacts programmed into their mobile phones,” Mr Bachrach said.
“Subtract the overlapping contacts in each of their phones, the automobile club, and their favourite Chinese take-out and you have two people sitting in your office at every client meeting with dozens, maybe hundreds, of names with contact information of people you could be profitably helping.
“You owe it to yourself to ask for referrals, get warm introductions, and become effective at converting referrals into appointments,” he said.
“By not developing a way to ask for referrals and orchestrating a warm introduction you are leaving money on the table and under-serving your clients," Mr Bachrach said.
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