A recent survey has shown financial planners expect strong growth in fee-for-service arrangements over the next three years.
According to Investment Trends, the total revenue derived from pure fee-for-service arrangements slightly increased to 16 per cent in 2007, representing growth of 1 per cent from 2006 figures.
Planners expected revenue from pure fee-for-service models to increase to almost a quarter of their total revenue over the next three years.
According to the survey, 11 per cent of planners now derived a majority of their revenue from pure fee-for-service models.
For those thinking of moving to a fee-for-service model, there is no better time than the present.
Commissions will be down commensurate with the reduction in take-up rates of new investments. Balances, too, are down in most cases so that will also reduce the income of commission-taking advisers.
And ironically, the tough market is probably seeing advisers work harder than ever before.
Good planners will be contacting clients and spending more time with them, rebalancing portfolios.
Whatever model of remuneration chosen, the service fees should stand the test of the higher workload. Planners that receive fees derived from a percentage of funds under advice will have to work harder than last year or the year before.
Perhaps it’s best to have fees for advice because they’re not linked to the share market.
However, the other side of the coin is that those on commission reaped extra benefit from the buoyant markets of the past five years. So it’s all swings and roundabouts really.
There is a business risk whatever you choose. You’ve just got to make sure the risk reflects your own personal tolerance.
