Do the One-Percenters – Managing Pricing
Welcome to the second article in our One – Percenters series.
As the sporting coach reminds us “Do the one-percenters!” These are the little acts, on and off the field, that in aggregate are sometimes the difference between losing and winning.
In this series we are highlighting the one percenters that apply to important aspects of running a financial planning business. We believe that Practices of all size can benefit from applying the one-percenters.
Remember 10 changes of 1 percent = 10 % which is massive generally in the context of critical issues such as productivity, adviser time or client numbers.
Managing Pricing – One-percenter tips
Let’s look at some specific examples of one-percenter tips that are relevant to managing pricing in a typical financial planning practice.
Review your cost to serve
• calculate your costs of staff including advisers and the hours available for working on client matters
• add your other business overheads and include these to calculate the cost of delivering services
• examine your advice process end to end and have a clear understanding of who is doing what tasks and the time it is taking
• include a profit margin of a minimum of 30% +.
Differentiate between levels of service & complexity
• consider a menu of services outside of what you consider a standard service model and price these appropriately
• there may be some clients that receive more from your practice than their fee may justify. Are they taking up a disproportionate amount of your time and resources for example. Involve your staff – they will know the likely suspects.
Implementing a fee increase
• Implementing a fee increase
• to be implemented as a project. Map your progress per client. Many manage this over the course of the year at the review meeting for clients.
• build your confidence, start with clients where increases are smaller and you have very strong relationships
• if you intend implementing a significant price increase approach each client on merit. If you really want to keep some clients who are facing large fee increases perhaps implement increases progressively over a couple of years.
Review moving on those clients on that cannot pay an appropriate fee.
• Remember it is difficult to be all things to all people. You need your business to be profitable in order to be able to deliver the services to the clients who are paying appropriate fees.
Review your fees annually.
• Include annual CPI indexation on your fees.
• there is not likely any correlation to the work involved vs commission received. What if the insurance recommended does not proceed? Introduce a fee for advice recognising the significant work involved in providing risk advice.
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