Mindset, confidence key to charging higher fees

Elixir Consulting’s annual Adviser Pricing Models Research Report found a “huge variance” in fees charged by advice practices despite many offering similar services to similar markets, with fees quoted for comprehensive advice for retiree couples varying from $2,000 to $20,000 among the firms interviewed for the research.

The report came to the conclusion that an advice firm’s confidence in articulating its value to clients, and adopting a positive growth mindset for the future as the industry faced rapid transformation, were key contributing factors to being able to charge higher fees.

“If advice were a standardised commodity, one could expect that there would be a correlation between the quality of the service provided and the quantum of the price,” report co-author Lana Clark said.

“Given the subjective nature of advice, however, it’s not surprising that this connection is less pronounced. Whilst it’s difficult to quantify mindset, the qualitative elements of this research clearly illustrated the influence that confidence and attitude have on the prices quoted.

“The evidence pointed to the fact that advisers who have conviction in their own value and are able to articulate it well are able to charge higher fees and are more positive about their business overall.”

The report cited the example of insurance advice, for which many advisers who had traditionally operated in the space were still reluctant to charge clients high upfront fees.

By comparing and contrasting one firm that offered clients a choice between a full up-front fee and hybrid commission model, and another that offered hybrid commission only, the report found that the mindset of both firms and their views towards the future of advice played a role in their ability to confidently articulate the value of their services to clients.

The firm offering up-front fees had charged an average of $4,500 per client, with 30 per cent of their clients taking up this option, and stated that “the growth opportunity in our industry has never been better”, while the firm charging hybrid commissions only remained convinced that “clients will never pay a fraction of what it costs to provide risk advice”.