With the end of commission in sight, Joanna Faith discovers the many and varied ways advisers can collect client fees.

Since the FSA announced an end to commission payments under RDR, much time has been spent discussing the pros and cons of moving to a fee-based system and why segmenting your clients can ensure they are not over or under paying you.

One area that has received less airtime, however, is how to collect fees from your clients. This is, arguably, the most important aspect of the new regulatory landscape as it will require a change in behaviour from both advisers and clients alike.

Here, three advisers who have all established successful fee models share their experiences on which methods work best... and which to avoid.

Jason Ashman

Chatfield Private Client

Ashman prefers to invoice his clients. He starts by providing a fixed fee estimate at the start of the relationship. “This provides the client with certainty and is the fairer option,” he says. “A lot of firms charge relative to assets under management but that’s unfair as you do the same work for clients with £100,000 as you would do for those with £500,000.”

Ashman eases clients in to paying fees by offering a guarantee. If, after the initial time period, which tends to be 6-8 weeks, the client does not think they have got value for money, they do not have to pay. He admits no one has ever refused to though. “If we weren’t adding value, why would we be charging a fee in the first place?”

When it comes to charging for ongoing services, Ashman asks what services the client requires and depending on the outcome, invoices the client a set amount each month. He says this gives the client certainty and also helps his business manage cash flow.

“Clients benefit from a monthly discipline,” he says. “They start realising the value we are providing. You pay for water and electricity monthly and you see the value in paying for it, you see what you’re paying for. We’re looking for long term relationships not transactional clients and that starts by being completely transparent.”

Minesh Patel

EA Financial Solutions

For investors with a large amount to invest, Patel implements a bundled package which costs £5,000 a year. Charging an annual fee is, he says, good for cash flow and better for clients.

“For this, we keep a vigilant eye on deposits. We offer them advice on pension contributions, changes to their investment portfolios, and introductions to areas outside our expertise. We’re in contact with these clients at least twice a month and we develop a kind of pseudo friendship with them,” he says.

For transactional clients – those who have a specific need to fulfil. Patel collects his fee out of the investment. “It’s clear, outright and there’s no conflict,” he says. “We try and cost it on an industry basis at 1.5%-2%.”

The only time he asks for a one-off fee is when giving mortgage advice as this is labour intensive, Patel says.

Patel has tried charging a monthly retainer but it did not work. “You feel obligated to do something when there isn’t something to do.”

Invoices can also be problematic if clients miss payment deadlines, he adds. “The FSA has not appreciated that if advisers move to invoices, this could mean problems with capital adequacy if clients don’t pay on time.”