The initial stage
After my child was born, I did not want to continue with my full time job in a wealth management firm as I wanted to focus on my personal life. This prompted me to float my own firm. After doing research and taking feedback from people, I realised that there were hardly any fee based advisers in India and I decided to fill this gap. I started my fee based practice in 2013. It was during this time that SEBI came out with RIA Regulations and I immediately registered myself as RIA.
How to talk about fee
My approach is simple - if someone can pay to their doctors or lawyers, they should also be also willing to pay to their financial adviser.
I have been charging clients fees for my services from the very first day. I did not face any issues because of my fee based model. Whenever I speak to any prospect, I explain to her about the services I provide and why is it important to have a financial planner in their life.
When I started my practice, I thought client acquisition would be a challenge since there is a belief that people hesitate to pay fees. But surprisingly, clients from my previous job were not only willing to come on-board and were also willing to pay fees.
Fee structure
I charge a quarterly fees based on the client’s portfolio performance and an AUM based fee for on-going services. Some clients prefer to pay fee upfront on an annual basis.
Lack of confidence
I believe there is an inherent lack of confidence among advisers to pitch the value proposition they provide to their clients. You will have to believe that your services are worthy enough for a client to pay fee. There will be times when prospects may question you or your rationale behind charging fees. They may give examples of other IFAs or distributors who are offering service for ‘free’ but eventually you will have to let your clients choose their preference.
Advice to fellow advisers
Your conviction in your work defines whether clients can trust you or not. You need to charge for your services appropriately. Investors will not disagree to paying a fee if they see your commitment and the effort behind the services you offer.
For new advisers, charging a fee can be an issue since they lack experience. But this does not necessarily mean that clients will not pay you. Start with a lower fee structure. This way, it allows clients to experience your work and as they start trusting you more easily, you can increase your fee later as the level of engagement increases. Psychology plays an important role here and advisers need to understand it from the client’s perspective.
It is a challenge for advisers who are shifting from distribution to a fee-based RIA model as many clients would hesitate since they haven’t pay you earlier. You may lose some clients but the choice is yours - whether you want to focus on growing client base or on building relationships.
