Fee based practice… it’s easier than you think

My journey started in 2002 at the age of 24. After being in the industry for four years as a broker consultant, with one of the major life assurers, I thought I knew the industry and what financial planning was all about.

I was very fortunate to have attended a week long course on Estate and Financial Planning presented by the late Etienne Marais Junior, who to this day, has had a profound impact on my views and thoughts.

Taking baby steps

As I sat throughout the course, I looked at what was shown on the board and what we had covered during the previous four days, and I came to the conclusion that I wanted to help people make plans and implement structures and processes that will help them achieve the things that are really important to them. Most importantly, I did not want to sell a policy, instead, I wanted to give advice and get paid for that. I wanted to be known for that.

The outcome I was looking for was one where I could use my technical knowledge and expertise to help people fulfill their dreams and lead the lifestyles they aspire to.

I quickly realised that I still had a lot to learn and I eventually went back to being a broker consultant. I believed that if I wanted to achieve my dream of being paid for my advice, I had to ensure that I had qualifications, experience and a professional body to back me. I enrolled for and obtained my degree through UNISA, and then proceeded to obtain my Post Graduate Diploma in Financial Planning and became a Certified Financial Planner (CFP). I achieved all of this by the end of 2011.

At that point I still felt I needed more knowledge and experience in running a business. It is one thing to do financial planning, but running a business is something completely different.

Leaps of faith

Finally, in 2013 I joined an existing practice. I started off the traditional way, by working for ‘free’ with the hopes of selling a risk policy or an investment.

I met as many people as I could and worked hard on producing plans that were sound and that added value to the clients. This was based on the philosophy of ‘first protect wealth, and then create wealth’. Yet only 30% of the time my work resulted in a sale of a policy or an investment.

This was very frustrating. I then realised that I did not plan my business properly and I also did not know what type or which type of client I wanted to work with.

In March 2014, I met a client who earned a very small salary. She was concerned about critical illnesses and we implemented a small amount of comprehensive critical illness cover. When I discussed the commission I was going to earn with her, she asked if she could rather pay me a fee. I was caught off guard and completely at a loss for words.

We worked something out that was more or less in line with the commission I was going to earn and that we both felt was reasonable. I changed the quote to reflect zero commission, which resulted in a saving that would recover the fee she paid in about four years and thereafter she would be much better off.

A lesson learned

This one incident sparked my memory and rekindled my dream from 2002 and I decided to research the market and to start playing with models and propositions.

I was very fortunate to have a great mentor that shared his, more than 20 years, experience of planning and charging fees for it and in July 2014 I had a fee model, a target client and a process in place. I took a very aggressive (in hindsight) approach by publishing a strongly worded statement to let people know that I am now charging fees for advice, my reasons for doing so and what the benefits were to them as a result of paying for the advice.

Seeing my first prospective client after this decision and communication was quite an awakening me and having that first ever discussion on the fees and what they were going to be, were really frightening.

During this first meeting, I could not provide the fee amount to the client and I told him that I would get back to him, which I did. I never heard from that client again, and so the cycle continued. I started doubting whether I was doing the right thing and if clients would in fact pay fees at all.

A colleague suggested that I should rather provide the fee amount during that first meeting, which I did and the client agreed. Thereafter, the rest is history.

A challenging reward

My story might read like a fairy tale, so let me bring you right back to reality! It is tough. Not all clients are willing to pay fees. The current economy is not making things easier. I have lost clients, but I have gained clients as well. My model and proposition is not perfect yet. It is a constant work in progress.

Let me end off by sharing some interesting results I experienced as a result of my focus on the plan, rather than the product, as the outcome:

• The conversations I am having with my clients are completely different and much more focussed on what they want from life;
• I now have a 80% implementation rate (as opposed to 30% before);
• The focus is on creating wealth first and then protecting it, which was just a natural turnaround based on the way the conversations went with clients;
• The satisfaction I enjoy when working with clients has gone through the roof; and
• I have not cancelled or replaced one policy since I started working on fees.

It is tough and challenging, but rewarding beyond words. My practice is still young and I am under pressure most of the time, but I will not change my model for anything.