Financial Planning How a fee based model works for me.

How a fee based model works for me.

RIAs divulge the highs of being a Registered Investment Advisor, the challenges they face and how they overcome them.
Daya R Feb 20, 2017

The SEBI’s investor Advisory Regulations, passed in 2013, are yet to catch momentum among advisors, who still go for a primarily commission based structure. In a country where financial advice has largely come free of cost, a few advisors are slowly cutting a niche for themselves by going for a fee-based model.

Kavitha Menon

When I approach a client, I make it clear from the start that I am not here to sell him funds, but to scrutinize if a fund is going to work for him. I tell him I do not have any conflict of interest, as I am not earning anything by suggesting the fund to him. This usually helps in breaking the initial reserve.

I run my prospective clients through the entire financial planning process, the costs incurred, how much he would save, if he would take our advice and how much he would have to pay us. I highlight that I am a legal fiduciary and that by law, I am required to declare any conflict of interest. I then leave the choice to him.

 Most of the time the client realises it is to his benefit to retain me on a nominal fee than go to someone else who might not charge him a fee but might have a conflict of interest.

Rohit Shah

While on boarding clients, I insist that they need to make a financial plan, instead of directly jumping into an investment. I run them through our marketing brochure that highlights the service they will be getting from us. Then I help them understand, that like any other professional, my services are also for hire.

I usually ask them if they would be more comfortable with a doctor who charges a fee from them and gives them medical advice they need, or a doctor who consults for free but takes a commission from a drug manufacturer. This example usually catches their attention and they realise that my interests are aligned with theirs.

The challenge is not convincing them that an RIA is better, but that we can give them value for the amount they pay us. Therefore, I explain in detail all the work I would do and justify the fee I charge him.

Suresh Sadagopan, Ladder7 Financial Advisors

Our website and all my social media interaction promote the idea of a fee-based advisor, who has the clients’ interests in mind. Though charging a fee is a challenge in itself, clients have started to see how such an approach works better for them in the end.

I make it clear that while they can get the financial plan from me, they are free to execute it through any channel, be it direct or through a distributor.

I do not compromise on the fee. I reveal upfront, what services I would provide, and how much I intend to charge. If a client is not convinced that he needs my services, I do not pester or try to hard sell. I respect his choice. This more than anything has helped me garner a loyal client base.

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1 Comment
Sonali · 1 year ago
What is the normal fee which is charged to the client per annum? Is it the function of assets? What if the client insists fr end to end solution and not only advisory?
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