Blogger: Chris Saunders, Principal, Instreet Investment Limited
Whether you are a product manufacturer or an adviser, you can’t deny that for many this is a seismic shift.
Having worked in this industry for more than 20 years, I have witnessed many changes, but the past couple of years have been some of the most significant in terms of market conditions, investor sentiment and legislative change.
Working with advisers every day we see that many have begun to transform how they communicate strategies with their clients and charge for advice. In our experience, about 40 per cent are rebating any inbuilt product fees and charging no additional upfront fees.
Why is this? Because many advisers have redesigned their business models and are using methods that better reflect their philosophy and attitudes towards fee for service.
Many other industries, including accountants, have to issue an invoice for work rendered without any cash flow certainty. There is no reason why the financial planning industry cannot thrive under the same conditions by actively pursuing excellence and creating lasting and flexible strategies for clients and their families.
Case studies
Let’s look at two different fee scenarios.
The first is “Peter”, an adviser who doesn’t want to bill his clients on an ad-hoc basis. Instead, he charges clients a retainer that varies in amount depending on the client’s individual circumstances and degree of complexity. He has the perfect vehicle for cash flow management. He takes no fees from product providers; his promise is to service and identify ways of bettering his clients’ circumstances. For Peter, the product is a means, not the way. He wants to leave no doubt that the clients’ best interests are front of mind.
“John” uses a different approach. He still takes a percentage of funds of advice and charges additional fees through product placement. The latter is effectively an implementation fee for strategic advice that happens throughout during the year as opportunities arise. It also allows John to engage clients on a regular basis with new products and ideas.
In both scenarios a fee is paid for services provided – and I see no problem with that.
About Chris Saunders
Chris is one of the co-founders of Instreet Investments Limited. A former Australian Rugby Sevens and NSW 1st XV Representative, Chris spent his off-field career in the financial industry, having spent over 20 years of diverse experience within the financial markets, funds management and financial services industries.
Chris spent 10 years in financial markets trading 90 Day Bank Bills, 10 and 3 year bonds on the Sydney futures exchange, for both boutique and institutional organizations. He has worked as a financial planner with Apogee FP, and since 2001 has held senior positions with Citicorp, Zurich Financial Services and Wilson HTM.
More recently Chris was CEO for a boutique financial planning business with assets totaling $2b and was Head of Private Wealth Management for Wilson HTM, responsible for the Financial Advisory and Financial Investment businesses.
Chris holds a Diploma of Financial planning, a Diploma of Business Management, and is a graduate of the Australian Institute of Company Directors
