You’re worth your fees, right?

According to our latest data, the average fee being charged to advice clients today is $3,852; to be certain, this is simply the average being applied across the total client base of the firm – there will be clients within the firm being charged significantly more, while there will also be clients paying less.

Also, at play within this data set:

• There is a high (97%+) retention rate of clients
• These clients are also highly satisfied, 4.23/5.00 is our national benchmark (CATScan)
• Almost 9 in ten clients (87%) state that they are willing to refer their adviser to others
• The average profitability % of these practices currently stands at 28.4%.

And while the above suggests to us (rose coloured glasses aside) that clients are prepared (satisfied even) to pay for their advice experience, as was recently observed by Netwealth in their 2024 Advisable Australian Report – value for money is the “single most important aspect’ that clients consider when deciding on an adviser and their offer. ?

We strongly endorse this sentiment and believe that the issue of ‘value’ will come under increasing scrutiny as operating costs escalate, new competitors enter the market and the children of existing clients (those who will inherit their parents’ savings) begin to question; “Why this level of fee, what do you do for my parents for this fee?” and then decide if this represents value for them. It is clear there are challenges, threats and opportunities for every adviser, to be ignored at their peril.

It’s for these reasons that we suggest ‘revenue per client’ is one of the most meaningful lead indicators which should be regularly monitored (and reviewed as necessary) for every client. It’s a useful metric which allows for the relative assessment of fees clients are paying for the services being provided. It’s also a very easy metric to calculate, review each year and consider on an individual client basis.

To the bottom line - advisers should be confident that clients see value in the fee they’re paying, as well as provide an acceptable ROI for the business. Consider:

• How has your service offer evolved to reflect the changing needs of your clients. For example, 42% of practices now include estate planning as part of their service suite, while 35% offer aged care advice.
• When did you last review your ‘cost to deliver’? Costs increase every year, have fees kept pace? Are there options to contain (even better, reduce) your costs? 74% of Australian advice firms have told us that they have reviewed their pricing model in the past 12 months.
• Consider the quality of providers who are providing services to you. Are they delivering value to you? Have their charges (to you) changed?
• What’s your profitability target for 2024/5? As noted previously, our latest marketplace average sits around 28.4% - a slight increase over the previous two years, but still below what we believe is a reasonable return for your efforts. What profitability target’s been factored into your 2024 fee schedule?
• How do you articulate and otherwise reinforce your ‘value’? Is it being communicated and quantified at the individual client level (especially during your progress to plan meetings). Does the client truly understand and appreciate how your advice is helping them to achieve their goals? Are they susceptible to an approach from another adviser who is offering a similar service at a reduced fee?

?As an aside, there’s excellent material espousing the value of financial advice from leading companies such as Vanguard, Morningstar and Russell Investments – great third-party endorsements for advisers.

• Be on the look-out for early warning signs of waning client confidence; missed scheduled appointments, lack of responsiveness to your requests for information/action, increased questioning of your advice, complaints and lack of referrals.
• Finally, to be absolutely certain – ask! Regularly seek feedback from your clients (confidential, independent, benchmarked surveys are best in our opinion). Are your clients truly satisfied; has their attitude shifted since you last sought their feedback?

?For your consideration.

Note: unless specifically stated otherwise, all statistics referred to have been derived from Business Health’s Future Ready IX report and our latest consolidated CATScan analysis.

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