"Advisers might well feel that a transactional commission/proc fee payment structure is no longer enough to cover all those costs that appear to be growing each and every year."
Reading a recent news story which covered a discussion at a CLC roundtable covering conveyancers’ fee levels for their work, I thought about the similarities that might well exist for advisory firms in the current environment.
It’s obvious that the ‘fates’ of both professions are entwined together in terms of transaction levels, completions, etc, but there also seems to be something akin to the same existential crisis regarding fees, method of payment, the future durability of the current system, also being faced by both.
The conveyancing discussion is one that has been ongoing for some time, in terms of the debate regarding fee level, the work now expected of conveyancers, and whether there isn’t a very strong case for raising the former in order to compensate for the increase in the latter.
Over recent years in particular, it would be safe to say that an increasing amount of work involved in the property transaction has been placed at the conveyancer’s door, and yet the fees have tended to stay similar over a much longer period of time.
For advisers, I wonder if the same argument isn’t being had within many different firms, particularly in a post-Consumer Duty world, where the expectations and responsibilities placed upon advisers has been ratcheted up.
We have moved, in the mortgage space at least, from what might be deemed a one-off transactional advice arrangement, to one centred far more on a ‘whole of life’ approach with the adviser expected to be in regular contact, to anticipate future changes in need and circumstances, and to advise accordingly.
Now, this is no bad thing, and in my view, can actually engender a much more robust advice practice, which doesn’t just focus on the mortgage transaction but all other needs that come with each and every client.
Plus, if you maintain that regular contact throughout their lifetime, then you are much more likely to have a ‘client for life’ rather than risking them jumping ship at the very first opportunity.
However, with this greater focus on servicing clients over the long term and the greater regulatory responsibilities and burden that comes with it, advisers might well feel that a transactional commission/proc fee payment structure is no longer enough to cover all those costs that appear to be growing each and every year.
Many advisory firms charge advice fees that cover this, but many do not, and we know there can be a reticence to change models for fear that existing clients will not accept the move.
This is a very similar dilemma that many conveyancing firms are facing. An acceptance that the fee structure of the past is not right for today’s marketplace, but a worry that changing, and raising fees, is a difficult decision to make and one that might well make them uncompetitive in a market which is already difficult to work within.
Perhaps the more pertinent point for advisers and conveyancers will be around just how long they can afford not to change. Conveyancers in particular have taken wafer-thin margins for many years, particularly in the remortgage space, and may well feel they have business models that can ride out any increase in work responsibilities. But, just how long they can continue in this vein remains to be seen, and one suspects they will need to move at some point in the future.
In the advisory space, there may well be a little more leeway to put off introducing adviser fees, but there appears to be a steady stream of firms now more willing to entertain this change in proposition. In a market dominated by product transfer business at present, firms are probably more minded to put this off, for fear of losing business direct, but again by focusing on all financial needs, not just the mortgage, they are likely to be able to make the case for adviser fees, and their value, much more to their client base.
Each firm will be different and each will come to their own conclusion. Certainly, maximising business in other areas, notably protection, GI, conveyancing advice itself, will be able to help, but it is always worthwhile crunching the numbers to see if today’s proposition and fee-charging is not just right for now, but also right for a future in which the cost burdens are only likely to grow.
