Switch On Solutions unveils fee-setting tools for IFAs
Two new products have been launched which could help advisers switch to a fee-based menu, following FSA concerns that many IFAs are merely paying lip service to this kind of remuneration
The two new products have been introduced by Switch On Solutions, a systems and procedures provider specialising in smaller IFAs, to help advisers set a competitive fee-based remuneration menu.
The 'rate setter' takes various input information to produce a minimum charge-out rate for each adviser and administrator within a firm. At £145, only one is required for each firm and can be used to justify the fees charged to clients.
The 'fee writer' is "a complete fee-based package from fee quotes to customer agreements to client explanatory documentation," the company said, allowing firms to set parameters for their advisers yet allowing them to create a standardised fee quote for each client. The fee writer costs £175 for each user.
Martin Andrews, a practising IFA and managing partner of Switch On Solutions, said: "Advisers need to come up with a standardised approach to this aspect of their business. Clients generally do not seem to like the open-ended commitment of a straight hourly rate fee. In my experience, advisers need to calculate fixed fees for the one-off work they do in most cases."
He continued: "They also need to devise a robust review system and a way of seeking regular income from clients who require an ongoing service. This will almost certainly include customer agreed remuneration, incorporating fund-based commission, but may also require payment of regular fees."
Mr Andrews said the launches were a response to IFAs who were finding it difficult to strike the right pricing balance of not risking a fine from the FSA for "dissuading [customers] from paying a fee" by over-charging, nor risk being under-cut by providers offering products directly.
Mr Andrews' brother Simon, the database writer for the business, warned that fundamental to this balancing act is accurately estimating and recording the amount of time a business activity takes them.
He said: "Any system of charging fees to clients must start with an accurate analysis of the hourly rate an adviser or any member of staff needs to be charging. Whether then adopting a CAR model, or an hourly rate model or a fixed fee or monthly retainer model, the IFA firm generally needs to be sure that it is going to remain viable as it switches to a fee-based model."
The Andrews brothers are also concerned about the prevalence of IFAs using wraps to handle all of a client's funds and operating a fee-based on a percentage of the "funds under advice." Simon Andrews said: "This is more of an investment management service only. We believe this model is dangerous in that clients do not want or need this type of service."
Online demonstrations of the two products are available by emailing: firstname.lastname@example.org