The initial phase
After spending 27 years in the army, I decided to quit even though I was promoted as a Brigadier as I wanted to turn my passion into profession. In 2009, along with my wife Bindu Govila, we floated Hum Fauji Initiatives which caters solely to military professionals. We have been charging fees for financial planning since 2009.
How to talk to clients about fee
Right from the beginning, our fee structure has been consistently shared with the clients, right from the very first physical interaction meetings to the emails sent to them or conversations on the phone. We have never compromised on this even at the cost of losing big business at times. We are very clear about the way we work and our value proposition - we add much more value to our clients than what they pay by the way of fees to us.
The mind-set problem
All our clients pay us a fee. If the clients do not agree to pay the fees, we do not on-board them, irrespective of the size of their portfolio. Probably the word goes around and hence, we now only get those clients who agree to pay fees. In fact, almost every client we meet for the first time, asks us our fee structure – clearly indicating that they themselves expect us to charge fees. We therefore have no doubt that the fee-phobia is more in the minds of the advisers rather than the clients themselves who are expecting quality service. We know that the advisory landscape is changing and the day is very near when the advisory will have to move to only-fee model. It is better that the clients and prospects get used to it as we advisors are getting used to it and are preparing for it.
Our clients hail from all over the country - from the largest cities to smallest of towns. Neither our support, quality of advice or portfolio management changes with their location nor does our fee structure. Advisors need to have confidence in their value-addition. I am very sure that about five years down the line, this fee discussion will seem so juvenile since everybody will be charging fee on a routine basis. Think back – each of the past events like abolition of entry load, capping of commissions, service tax on advisers etc. – each of them seemed the end of advisory business during that time, but the business is still thriving and thriving more than in the past.
Fee structure
For financial planning, the fee is on a flat basis. For investments, the fee is AUM based and we have devised a slab-based structure for it.
The fees are charged on an annual basis but we would very much like to break up the fees on a quarterly basis – currently we are not able to do it due to the problems in physically collecting the fees since our clientele is spread not just across the country but the world.
Advice to fellow IFAs
Consider yourself a financial doctor. If you are running an ethical, professional and efficient business, do not hesitate to ask for fees, exactly the way a doctor does not hesitate. The word will go around about your work as also the fact that you provide value-for-money. It will be only a matter of time before you get the clients you deserve. And that will be sooner than later. If you do not do it now when you have the choice and luxury to implement it on your own terms and conditions, you may be forced to do it in a hurry and on somebody else’s terms and conditions since you will not have a choice then.
The advisers have to prepare themselves and their team members as to what type of clients they want, and more importantly, whom they don’t want. If this is understood clearly, this fee-charging dilemma will automatically become a non-issue now and forever.
