Most investors do not know what they want to do with their money, which is why there is a huge opportunity in the advisory business. “There is an old adage that if you don’t have a destination every path will take you there. Most investors are in this place and as their advisors it is our duty to help them identify their financial goals and figure out the best way to invest their money,” says Suresh.
Why fee based advisory?
Dispelling fears that investors will not be interested in paying fees, Suresh points out that he has been charging fees for over a decade and all his clients are happy paying a fee. “As fee based advisors we operate across asset classes; this keeps us on our toes and helps us earn respect,” he says.
Another advantage of a fee based model, according to Suresh is that, unlike commission based advisors, fee based advisors have full control over their earnings. “The future is moving towards fee based models. As remuneration through commissions comes down, more advisors will start charging a fee,” he says.
How to make people pay fees?
The first step to having a successful fee based practice is to show the client the value he derives from the advisor. “You need to show the investor you not only give him the clarity on where to make his investments but also ensure he has a better structured portfolio, better tax efficiency, right choice of products and better goal alignment. As advisors, we also stop them from making mistakes. We are basically an unbiased, third party sounding board to clients,” he says.
Another thing advisors can do to convince their clients to pay a fee is show them how much they save by taking your advice. “When I show clients that my fee is but a fraction of what they are saving by taking my advice, they are happy to pay my fees. I also try to alter the frame of reference to put things in perspective,” says Suresh.
“A maid or a driver is considered an essential in most households, unknown to the investor he pays crores of rupees over his lifetime for their services. When I ask him, why he is unwilling to pay for the services of a financial advisor who will help him grow his money, I usually end up convincing him,” he says.
“As long as we show them why they cannot do without us, investors will never say no to you. Fee is never a problem,” says Suresh.
