A growing number of financial advisers are moving away from asset-based fees in favour of alternative pricing models, research by a business consulting firm has found.
In its third edition of the Adviser Pricing Models Research report – compiled from an analysis of 275 financial advice practices – Elixir Consulting found the number of advisers that charge clients using asset-based fees has declined over the past two years.
Speaking to ifa, Elixir Consulting managing director Sue Viskovic said there has been a “significant change” from the findings of previous research, with the number of advisers using asset-based fees as a standalone model dropping to 34 per cent.
Ms Viskovic also pointed out that the analysis found many more advisers “preferring” to use a flat-based fee model with 44 per cent of businesses taking this approach
“[Also,] a new model we see being adopted more widely this time around, which wasn’t as popular or hasn’t been as popular in the past, that’s the model where they will have a flat retainer but they also have a small percentage that’s applied against the assets that are managed,” Ms Viskovic said.
“This hybrid of flat retainer plus a percentage, there was nine per cent that used that model – so that is quite significant, we weren’t seeing that before,” she said.
Ms Viskovic recommended that when advisers choose to implement a new pricing model for their business, they should not look to “copy” or “replicate” other business’ models but rather they should investigate or research which model will best suit them.
“[It is about] ensuring that they don’t just hear about something and [decide] that 'I am going to change it to that', but [that they] go through the thought process and analyse what is going on in their four walls first of all to then arrive at the right model,” she said.
“The right structure would depend on the client base as well and what their preferences are and what their current situations are like [as well as] the service delivery."
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