The current changes to risk adviser remuneration models remind me somewhat of the introduction of commission disclosure back in the 90s when for the first time, risk advisers had to disclose the amount of commission they were being paid for the cover they were recommending.
An awful lot of seasoned advisers threw their hands in the air and exclaimed, “I don’t want to tell my clients how much I earn”. I would reply, “Don’t, then” and they would say, “But I have to now by law”. I would then say, “No, you don’t have to tell your clients how much you earn. Tell them how little you earn.”
If you think you’re being overpaid for the value that you represent to your clients, you should probably get out of the business.
Realistically, most risk advisers will be looking at embracing a remuneration model that combines commission and fees, but I find that many advisers are struggling with the concept of incorporating fees i to their remuneration, which is totally understandable as the have operated purely on commission for such a long time.
Having engaged with many advisers on this topic over the past couple of years, I believe that a majority of the problems in this area are in your head, not the client’s. You are already delivering huge value to your clients, therefore any changes needed will typically be changes to your mindset rather than your process.
When the concept of value reared its head in the risk advice space a few years ago, I think a lot of advisers grabbed a piece of paper and started to draw up a list of boxes that had to be ticked in order to be seen to be giving value.
But here’s the thing, value is not something that is specified. It is something that is perceived. It is an awareness on the part of the client and it stems from the client enjoying a quality experience rather than simply experiencing a transaction.
Moving forward I believe paying for quality advice and service will be an expectation of quality clients, therefore the key will be to get off the back foot and on to the front foot as early in the engagement process as possible.
What better time to preposition your fees than at the Financial Services Guide stage of the process? Off the back of outlining the range of services you can offer your client over time, you have a perfect opportunity to start talking about which fee structure will be appropriate for this particular client rather than whether any fee at all will be payable.
Chris Unwin is founder and chief executive of Chris Unwin Training & Consulting Services
