Making financial advice more affordable sits at the heart of the Delivering Better Financial Outcomes (DBFO) reforms; however, practice advisers still need to be able to charge at a sustainable rate for their business while also reflecting the education and experience that goes into being a professional financial adviser.
Even so, it can be easy for newer advisers to feel pressured to charge less just to get people through the door and keep them there.
This is an experience that independent financial adviser Nathan Fradley can relate to, as he found himself charging too little earlier in his career, something he said led to burnout before he realised he wasn’t charging appropriately for his services.
“In my last business, I did low bono, no bono, whatever you want to call it. I undercharged chronically. I did way too many SOAs. I burnt out because I was trying to do too much for everyone,” Fradley said on an Advisely webinar.
“As soon as I put the right fee down, everything changed.”
By charging too little, Fradley explained, you can really “shoot yourself in the foot” as this can put a lid on clients’ perceived value of your services early on that can cause more challenges down the road when it comes to fee increases and business sustainability.
“You bring someone on, you charge what they can afford because you want to help them, or you need some business, or whatever it might be, you’ve now pegged the value of what you do,” he said.
“If you bring them on at two grand and you deliver an excellent service. They value your services at two grand. You bring on someone else five years later at eight for exactly the same thing, they’re never going to understand why it’s $8,000 because their price point is not there.
“And I think that’s a challenge we’ve got when you’re trying to grow quickly … You want to be setting that tone at where you’re heading as a business, not where you are right now.”
Conrad Francis, the founding director of Inspired Money, noted the importance of having processes in place in your business so prices can be assessed and adjusted as needed.
“We’ve got a client value proposition, which we look at probably at least once a year before we do our new budgeting. So, we look at the touchpoints, the cost of the touchpoints and establish a base fee and I think that’s what gives us the confidence in our charging,” Francis said.
Noting the importance of knowing the value of your time, he explained that his firm has a policy in place that makes fees more flexible, allowing advisers to adjust the cost based on the level of service required, ensuring the needs of both the client and the adviser are met.
While sustainability of the business is top of mind for practice owners, Fradley noted that fees should still reflect the value delivered to clients, reflecting both the quantitative and qualitative benefits delivered.
“I would say it’s got to be at a price point where there is more value, substantially more value, than you’re able to charge but you can sustainably maintain that and that should be at least six and a half grand,” he said.
“So, if you’re not creating at least 12, 13, 14, 15, plus all the qualitative stuff, which is the stuff that actually matters, then it’s not a fun number, it’s not for me, it’s a complexity matter a lot of the time.
“It’s what I refer them out for. I keep the really complex stuff, but for just a general viewpoint, it’s got to be a sustainable price point that creates enough value.”
