Ahead of the Royal Commission’s final report’s release on Monday and the media storm it may inevitably stir against the financial services industry, advisers could benefit from considering a fee structure that places the value clients receive from advice at its centre.
Perth financial services firm and Association of Financial Advisers (AFA) 2018 Practice of the Year, TWD Australia, saw the number of clients approaching it grow in the wake of the Commission, and its founder, Troy MacMillan, puts this down to its value-focused fee model.
A large portion of these new clients had come via referrals from TWD’s partners, including accountants, a profession that often was hesitant to send work financial planners’ way.
This fee structure was so at odds with the commission-focused model eviscerated by the Royal Commission that MacMillan said some people had asked him if TWD had implemented it in response to the Commission. He said however, that the firm had had it in place for 10 years as it “just made sense”.
Speaking at a media roundtable yesterday, MacMillan also clarified that this meant trying to make advice more valuable rather than more affordable.
Also central to the fee structure was ensuring that consumers understood what they were paying for, with TWD director Cara Graham believing that this made it more likely for clients to see what they got for the price of the advice.
“You need to positively relate fees to value to re-engage clients,” Graham said. “All advisers need to get better at articulating the value of a product to a client and not relying on commissions.”
Considering Royal Commissioner Kenneth Hayne’s final report could well spell the end for commissions, that too could prove pertinent advice.