A 10-minute conversation with Neil Kendall, authorised representative of Tupicoffs, about financial planning is all that’s needed to understand why he is the 2006 MoneyManagement/Advance Financial Planner of the Year.
Speaking with passion and enthusiasm for the provision of quality financial advice, Kendall’s innovative approach to a fee-based model of remuneration has clearly been designed with the client’s best interest in mind.
According to the certified financial planner, Tupicoffs is achieving what is regularly being talked about in the industry but not actually happening — charging a fee for a service based on the service and not the assets.
Kendall’s model of remuneration
With almost 16 years experience under his belt when he became a partner at Tupicoffs, Kendall realised the remuneration model that was being used at the time was not sustainable.
“When I bought into the business here it was a commissions-only insurance business. We redefined the model and said ‘what would be the model I would want if I was the client?’ — I wouldn’t want to pay commissions and would want someone who could advise me on anything I needed to know without being biased,” he said.
“Everyone is talking about fee-for-service, but the interpretation is very different. I think we are charging a fee for service that the clients would consider to be fee-for-service.”
Under Kendall’s remuneration model, the client is charged a fee based on the level of service that is required.
The fact the client may have $1 million to invest or as much as $10 million to invest is not represented in the pricing equation.
“Currently, most people who charge a fee for service — that fee is say 1 per cent of funds under management in a particular platform — we take the view that’s commission,” he explained.
“We work out what work we need to do, price that and add a factor for risk, add a profit margin and we’ve got a price.”
Kendall’s model is also created in such a way that it ensures the client receives value throughout the entire year, on a rolling basis.
This is to counter what Kendall calls the industry’s obsession with passive income — being paid for not doing anything.
“We built a model that says every year you have to ask your client for next year’s fee, so that if during the year I’ve done no work for the client and added no value, when it comes time for me to say ‘this year I’d like $5,000 from you’, the client is going to laugh,” he said.
“[This means that] during my day-to-day activities I am focused on how I ensure I add value to my existing clients on an ongoing basis, otherwise when it comes time to ask for a fee, I won’t get paid.
“It’s a lot more work for less money, but then one could argue that a lot of advisers are overpaid for what they do.”
In the minority
Kendall believes there is a significant difference between a consumer’s perception of advice compared to that of a financial planner.
“I think what the general public believes financial planning advice is and what financial planners believe it is, is quite different.
“The public is looking for ‘stand independently and advise me’, but most financial planners, because of the way they have structured their business, are thinking about ‘how can I put money in a managed fund and get paid?’”
As such, Kendall endeavours to give people advice completely independent of products and has structured his business to reflect this.
However, he admits this is unfortunately not an attitude that is shared by the majority.
“Having just spent two days at the Financial Planning Association conference talking about this with several planners, it’s not a model that sits well with a lot of people,” Kendall said.
“I guess they can make a very good living charging a fee based on assets under management, and while they continue to do that the advice model doesn’t have a lot of appeal.
“We often talk about the theory of charging a fee-for-service as a common theme, but in terms of someone actually sitting down and doing that there are very few practices that have gone and built a fee-for-service model.”
Value for money
According to Kendall, an adviser produces more than just financial benefits for their clients — they also deliver peace of mind, someone to talk to who is on the client’s side and constant availability.
As well as these attributes, Kendall goes above and beyond the call of duty to ensure his clients are satisfied with his service.
“We give clients a guarantee that if we do a Statement of Advice (SOA) for them and they don’t think it’s worth more than what it costs, they can give the SOA back and not pay,” he said.
“That allows them to work out if it’s valuable or not — to each person the value of advice will differ depending on what they’re looking for.”
Tupicoffs also conducts formal introductions to the business for new and potential clients, involving a presentation that explains the method of remuneration and what is offered as well as covers off the standard compliance requirements.
“When a client walks into your financial planning office who has never seen a financial planner before, which is mainly the market we work in, there are two things they are worried about: how much is this going to cost, and can I get out of here today without it hurting?” Kendall said.
“We tell them right up front, we won’t ask them to make a decision while they are sitting in our office, because our proposition is we have a lifetime relationship with them, so it doesn’t really matter if they make a decision while they are sitting here with us or in the next two weeks at their leisure.
“We do not want to get someone across the line today, but then have an unpleasant relationship for the next 10 years.”
