Future of Financial Advice (FOFA) reform fallout is affecting lawyers and accountants, who are being encouraged to move away from open-ended time-billing - which has some parallels with advisers' commissions - to agreed fixed-fees.
The commission-based payment method traditionally used by financial advisers concealed how much the adviser earned for delivering a particular product or service, said legal firm Bowen Buchbinder Vilensky director Craig Hollett.
"If most clients were asked what they paid their financial adviser in the last 12 months in commission-based payments, they would be unlikely to make a guess remotely close to the mark," said Hollett.
In a different - but parallel - way, the new client turning up at a lawyer or accountant's office has traditionally no way of knowing how much they will be charged for a particular piece of work until the lawyer stops the clock at the end of the exercise, he said.
The move to fixed-fee pricing by legal and accounting firms "is proving every bit as unsettling. In these professions, as in financial advice, the change in billing method is symbolic of a much broader shift in positioning to one which is far more results-focused and client-driven."
The previously open-ended charging methods used by lawyers and accountants had introduced "tension into the relationship, sometimes culminating in a dispute over the cost of work already done. The lawyer or accountant is forced to discount their fee and can end up resenting future work for that client".
The move to a mutually agreed fixed-fee for delivery of specific professional services signalled new transparency.
"Providers of professional services can provide certainty and peace of mind to a client at the beginning of the engagement rather than the end," Hollett said.
"You can have the 'costs discussion' with the client before the work is done and negotiate the fixed-fee from a stronger position. Costs disclosure means that everyone is on the same page from the beginning, and the scope of work and the fixed fees are agreed upfront."
A second benefit is that the main focus is on what clients would receive for their money.
"Too often, in my profession," Hollett said, "there are cases where a law firm undertakes all manner of billable activity on behalf of a client for which no specific benefit is expected, but which contributes very nicely to profitability.
"This poses the question of how it can be in the best interests of the client to provide a professional service for which the client obtains little or no benefit, but which increases the commission or fees the professionals receive as a result."
The new fixed-fee charging regime put advisers and clients on the same page.
"For both sides the priority is to deliver the best results possible, in the most efficient way. In legal practice this has been a refreshing change, although it does take some time and mental re-training to get used to."
Hollett said many lawyers and accountants "may baulk at the prospect of the dramatic changes occurring", but "proactive, adaptive and nimble" firms would benefit most.
"The experience of my firm in changing to a value-pricing model has been one where both clients and lawyers are happier as a result. The client is happy because they know the cost upfront and are not taking on all the risk in achieving an outcome. The lawyers are happier because they can get on with being a lawyer and focus on results, not fees."
