Financial planners will soon have to provide fee disclosure statements to their clients. Claire Wivell Plater of The Fold says it doesn't have to be an administrative headache.
Video transcript below:
Donna Sawyer, Wealth Professional
Donna Sawyer: Advisors will soon have to send out fee disclosure statements, but for those who think it’s going to be an administrative headache, there are ways to make it simpler. Claire Wivell Plater of The Fold says an engagement letter that lists your services along with a fee disclosure statement that shows a tick or a cross next to the services provided is a good approach to take.
Claire Wivell Plater, The Fold
Claire Wivell Plater: They first of all need to clearly define what services they are going to provide to the client. If they do that, it will then become easy to list those each year when they do their fee disclosure statement and report against which services they have provided. The second thing they need to do is think about how they, how they structure their fees. If they simply have one fee for all their services, it’s going to be a lot easier to report against that, whereas if they have a number of different fees for different services, they will have to report against each one individually and perhaps a lot of advisors don’t realise that at this point in time. So they are the two key things. I think at the moment the biggest administrative problem for them will be finding out exactly what fees they are charging because the fees come from a number of sources. But over time as they move to non conflicted remuneration, that’s going to become easier and of course technology will catch up with their requirements as well.
Donna Sawyer: She says disclosing fees in a statement of advice is not a good move.
Claire Wivell Plater: What many advisors currently do is, that they list the services that they will provide on an ongoing basis in their statement of advice and they have that as a quasi engagement letter. And they can continue to do that if they want to, but our recommendation is that they use a separate engagement letter. We think that putting it in a statement of advice muddles up the purpose of the statement of advice which is actually to give their advice and probably isn’t the appropriate place to enter into a contract with the client about the ongoing provision of services,
Donna Sawyer: When talking fees with your clients, don’t be nervous. Claire Wivell Plater says clients expect to pay for services, but it’s all in the pitch.
Claire Wivell Plater: For client engagement I think the key message has to be about value. If you talk about costs, clients are, always find that difficult to be honest, so do most planners. But if you talk about value and what you are delivering to the client, then I think that the client really appreciates what it is that they are getting. They are getting peace of mind, they are having their security that their financial situation will be managed and looked after for them and they expect to pay when they get value, they pay their plumber, they pay their electrician, they pay their accountant, they pay their doctor, so why shouldn’t they expect to pay their financial planner as well.
Donna Sawyer: This is Donna Sawyer reporting for Wealth Professional.