As financial planning practices attempt to find the right fee model to recoup lost revenue streams in the lead up to commissions and conflicted remuneration structures being banned, many are struggling with the changes.
Elixir Consulting managing director Sue Viskovic told InvestorDaily there were difficulties for advisers in determining what kind of fee to charge, how much to charge and time commitments.
Under the government's Future of Financial Advice (FOFA) reform package, commissions will be banned from 1 July 2013, however asset-based fees would still able to be charged by advisers.
The use of an asset-based fee over a flat fee was acceptable so long as there was a genuine rationale and process behind the choice, Viskovic said.
"There are more planners going to flat fees than there used to be but of those that are still sticking with the asset-based fee route, if they've taken it as the easier option, when they start to have any pushback from their clients it's difficult for them to demonstrate the value of that model," she said.
"For the right business that has looked at it in terms of the offer they provide and how they service their clients, you would be hard placed as a client to feel that you're not being looked after under an asset-based model."
Advisers that focused on higher end clients and could add significant value in the investment process were determining that an asset-based fee was the best way to charge.
Those that chose asset-based fees as the "easy route" were easy to identify as the conversation and articulation of the offer was quite different, she said.
Advisers had also not realised the depth of focus a new pricing model required, therefore adding confusion to how much to charge.
"If they think it's just about coming up with a number, they'll quickly discover it's very difficult to implement because it's an involved process," Viskovic said.
"Practices must go right back to their client value proposition, how services are delivered and what will be delivered to clients."
Another barrier advisers were struggling with was ensuring that applying a higher advice fee translated to an equivalent amount of value to clients.
"That's an initial fear for advisers," she said, adding they were intent on getting the balance right.
"Some advisers are finding they can determine a service offer that's cheaper than what they've charged before because they've become smarter about how to deliver that advice - they've recognised a market sector they want to service and they're able to structure a service that can be profitable at valuable price point for the client."
The time-consuming nature had also contributed to advisers avoiding a revision of their fee models, Viskovic said.
A passive approach resulted in the process spreading out over a lengthy period of time whereas those who had a plan of attack could take three months to restructure the business and about 12 months to roll out across their client base, she said.
She said the industry shift over to commission-free, sustainable fee models still had a while to go.
