We have considered charging by the hour and charging fixed fees for advice. But, when considering your charging structures, you must think at the same time what the regulatory rules say about adviser charging.
The handbook rules state that you must “determine and use an appropriate charging structure for each retail client”. The guidance accompanying that rule says you “may use a standard charging structure for all of your clients”.
The only limitation is that you cannot vary the charging structure depending on products or providers (for example, using lower charges to incentivise adoption of platforms or in-house funds).
From this it is clear that it is perfectly possible to agree a different charge, and indeed a different charging structure, for each client. Some argue that it is not treating customers fairly to have different mechanisms for each. However, it is arguably equally unfair to overcharge clients for the services you are providing by applying a blanket charging structure when different methods could be more appropriate for a particular client or a particular piece of work. It is also unfair to your business to apply a blanket charging structure which will ultimately undervalue your proposition.
A combination of hourly rates, potentially converted into project fees for initial work, with percentage fees underpinned with a minimum monthly charge for review services would work perfectly well for the majority of firms.
Additional services can be charged for fixed fees and advice for children can be incorporated into a family adviser charge. Advice or guidance can be offered pro bono according to established eligibility criteria or earmarked time available for work on this basis.
Finally, remember that as a business owner you must balance income against expenditure and come up with a profit. This means you will need to continually observe patterns of work, time spent and revenue generated. You may need to develop various iterations of your charging structure as you can see patterns of unprofitable work emerge.
If you have other staff and advisers ensure that they not only understand the charging structure but embrace it. You and everyone else in your firm must be totally comfortable that the method(s) you select are fair to the clients. If they (or you) are not convinced, accurate timesheets will not be kept and work undertaken will not be recorded.
If pay or bonuses depend on fee income and revenues, just as with commission-based structures, you will need to watch out for behaviours which take advantage of the system and hide unprofitable activity.
A business owner must create a system fair to clients, fair to staff and fair to the business as a whole. If there is any doubt, the system will simply not be applied and instead of being an effective and profitable fee structure, will become a mere guideline used when appropriate and ignored when necessary.