How to Move from Being a Commission-Based to a Fee-Based Advisory Firm

How to Move from Being a Commission-Based to a Fee-Based Advisory Firm

How to Move from Being a Commission-Based to a Fee-Based Advisory Firm

Planning for a commission-based earning can cause quite a headache. Although commissions can be sizeable and certainly to the advantage of many, it’s hard to rely on an investment’s opportunity of success. As any commission-based financial advisor already knows, the cost of earning a profitable commission isn’t purely from the amount of effort but it also relies heavily on the client’s decisions. In other words, there are a lot of variables that go into making sure you earn the desired amount.

On top of this, there’s the threat of hitting a wall in your firm’s growth too. With limited funds and resources, the harder it will be to close more prospects and expand the business. For this reason, many advisory firms opt for a fee-based operation.

Transitioning to a recurring revenue business model isn’t difficult. However, it does require organization and a proactive approach to client management. In this article, we’ve outlined a few key considerations to help you with this transition.


Why Make the Switch to a Fee-Based Structure?

When it comes to changing your business model, it’s inevitable that there will be a fair amount of risk involved. Yet, in this case, the positives outweigh the negatives. Here are some of the advantages you can look forward to with a fee-based business structure.

Easy Scalability

With a fee-based approach, scaling your business becomes more seamless and less of a headache. Although it may take longer to arrive at a point where your financial position allows it, there’s the possibility of taking your business to the next level of growth with new staff and resources. By increasing your cumulative fees, there is a greater chance of expanding your offering and boosting the amount of revenue stream into the business.

Improved Understanding Between Clients and Advisor

Working on commission can always add a fair amount of tension to a client agreement when it comes to calculations and charges. Furthermore, a decline in account value could decrease the advisor’s compensation. Having a periodic payment of fees can provide structure and certainty to both clients and financial professionals.

Ongoing Growth

When working with commission, seeing your advisory firm continue past your sole input is limited. Businesses are more likely to top out when they are unable to afford more time or bring on new clients. With a steady and predictable income, recurring fees can assist in your firm’s ability to boost its growth without excessively increasing its overheads.


Transitioning From Commissions To A Fee-Based Business Model

Converting your clients from commission to a fixed-rate payment system may take time. Nonetheless, once this has been established, it’s far easier to run an effective fee-based business model for future clients. Here are strategies to see you through the transition.

Build Your Value Proposition

Successfully switching your clients over to fixed-rates lie in highlighting the benefits for them. Your clients will accept this change better if they know it’s in their best interest and that there are advantages to gain.

In your value proposition, consider how the services your firm provides brings value to your clients. After all, your clients are working with you and your ability to help them to achieve their goals and provide a unique and expert approach to their investments. Being able to clarify this value can help set you up for a smoother transition.

Segment Your Clients

Switching over your payment structure won’t happen overnight. In fact, it’s best to approach this change gradually by segmenting your client base. This will make it more manageable and give you time to test the waters with your new and improved value proposition.

Ultimately, this process will be unique to each firm. It is recommended that you start off strategically with clients who take a more hands-off approach to investing. Alternatively, you could look at modifying those who are new to your books. Clients who are less likely to question your investment decision are typically more accepting of new structures and changes.

Once you have constructed a concrete pitch and billing process, you can start to tackle the rest of your roster. To maintain good customer service, it is advised that you consider their personal needs too. Maintaining a long-term relationship should be a priority.

Develop a Convincing Pitch

Once you have segmented your clients, the next step is preparing a winning pitch. Clear communication is key as you enter this new phase for your advisory firm.

It’s only natural that your clients may have initial concerns and doubts. Your pitch should not only address this but propose effective solutions too. Make sure to revolve this discussion around your clients’ needs, the benefits they can expect to receive, and ultimately the improvement that will arise in performance levels.

Prepare Your Team

Whether you’re a one-person operation or a fully-fledged team, understanding the following steps to your advisory firm’s operations is key. This transition will bring about a shift in company culture and operations. As the leader of your firm, it’s important that you provide a consistent outline of the new process and client management.

If any speed bumps arise, allowing for open communication with your team will allow for a seamless transition. When the whole team is on the same page, the less likely it will be for any discrepancies to arise.


How Can Britech Help You:

As part of Britech’s SaaS offering, we provide our users with a simple yet effective billing solution – Pivolt Billing. With a highly flexible and automated approach to billing, our component allows for various fee calculations based on your clients’ agreements. Whether you’re running off of a fixed rate or commission-based operation, Pivolt Billing provides detail and clarity into your firm’s finances. It can also be integrated with any 3rd party accounting systems.

To learn more about our accounting software and billing systems, please get in touch. One of our team members will be happy to guide you through what you can expect when working with Britech.


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