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Advisers searching for an alternative pricing model to commissions should avoid charging hourly rates, according to the managing director of Elixir Consulting, Sue Viskovic.
Viskovic warned a session of the Financial Planning Association conference that a practice that charged by the hour would find it difficult to become more efficient or increase its revenue.
A business that charged by the hour would find it difficult to create more efficient ways of doing business, as more efficiency would decrease the time needed to run your business, which would reduce the revenue to the business, Viskovic said.
“What’s the point of talking to people like me and getting better at the way you do business, if it just means that you can make less money?” she asked.
Revenue would also be limited by your staff, because every time your business grew the only way you could increase your revenue would be to hire more staff – which would increase the overheads for the business, she said.
“Not only are we adding to overheads in terms of salary and debt and a computer for them to use, but we’re also adding risk to our business – because if we get that decision wrong and put on the wrong people, it could cost an awful lot.”
It would also discourage client contact, as clients would not want to have to pay for a phone call or an e-mail and would therefore not contact their financial planner, she said.
It should be a long-term relationship with constant contact and development over time, and if the client says he doesn’t want to come in for a review because he doesn’t have the money to pay for an hourly rate, he will miss out on necessary advice that would improve his financial situation, she said.
