The initial phase
In 2007, when the markets were scaling new highs, the return expectations of clients too were very high. It seemed everyone, including many without any relevant experience was becoming a financial advisor and too many structured products were available which claimed to provide high returns. The 2008 global meltdown was a testing time for advisors and only a few could survive the crash. We realized that a financial adviser’s job is not just limited to preparation of financial plans but extends to many other things including hand holding the client during difficult times. Thus, we decided to start charging fee for our services since 2009.
How to talk to clients about fee
Clients have to understand the value you provide to them. This process can take time but your relationship with clients will depend on how easily you can talk to them about fees. Your lack of confidence may give a chance to clients to question your motive behind charging fees.
I believe RIA can be a license for advisors to ask for fees. The RIA model is here to stay in India. So you will have to decide how to charge fee from clients.
We charge an on-boarding fee which includes the fee for preparing a basic financial plan. We also charge fees annually on the basis of AUM.
Advice to fellow IFAs
In order to convince investors to pay fees, you will have to change your mind-set first. If you have conviction in your business, then you will definitely get clients who value your expertise. Unless you believe that your services are worthy enough for a client to pay fee, you will not be taken seriously.
Those IFAs who follow a completely retail model may face more resistance but ultimately they will have to choose which category of clients can support their business growth.