Let’s presume you’re just starting out as an independent financial adviser. In that case, you’re probably still figuring out how to structure your commission and fees.
It’s a big decision since it will impact how you run your business, manage your operations, and structure your finances. That’s why taking the time to understand what options you have for structuring your commission management fees is essential.
· What potential roadblocks or pushback will you encounter from clients?
· How will you structure your fees so that you are financially secure and your clients are happy?
We’re taking a closer look at commission and fees for financial advisers, how they work, and how to help advisers make the best decisions for their business and clients.
Financial Adviser Commission
What is a reasonable commission for a financial adviser?
What you decide to charge will depend on the scope of financial services you offer, as well as the fee structure you use for your practice.
As an independent financial adviser (IFA), you may decide to either:
· Charge a flat rate based on the service you provide.
· Assign a value to the time it takes you to complete a specific service.
· Accept a provider commission to sell products to clients or manage investment portfolios.
Many IFAs run their businesses through a combination of flat-rate fees based on services they provide to their clients and management and sales commissions.
If you opt for charging a flat rate, you have the legroom to decide how much you’d like to charge clients for the services you offer. However, it’s important to note that your commission rates should align with Financial Services Conduct Authority (FSCA) regulations.
This ensures your commissions are fair to clients and above board.
Is the compensation for financial services and advice worth it for IFAs?
As a relatively new independent financial adviser, you may find that the compensation you’re receiving isn’t enough for the amount of time you need to perform certain services. This is fairly common, especially for IFAs with a recently launched practice.
When it comes to flat-rate fees, adjusting where necessary can help streamline the value of your services. Be sure you notify clients of any upcoming fee increases, so there’s complete transparency on your end.
For commission rates, any proposed changes must adhere to any agreements within a client’s contract as well as FSCA regulations.
What are typical commission fee management issues?
Keeping track of multiple streams of incoming commission revenue can be challenging. Especially once you start scaling your business and taking on more clients, since most of your time is spent on:
- Managing day-to-day operations,
- Liaising with clients,
- Performing financial assessments, and
- Leveraging advice to clients
Lack of time causes many IFAs to be slow to follow up on and assess the state of their commissions, which can potentially cause you to leave money on the table.
Managing your commissions is even more challenging if you are still relying on manual spreadsheets to help you manage incoming fees.
What can you do?
To make commission management simple, you should consider using world-class commission management software to help you track incoming commissions.
What to look for in commission management software
Commission management software can be a valuable asset to help you track and manage your commission streams effectively. However, excellent commission management software should do more than show you the ins and outs of your revenue flow.
Here are a few key features to look for when selecting commission management software:
Any commission management software that makes promises about being comprehensive and doesn’t offer cloud-based capabilities is anything but.
You might work from home, have flexible hours, travel frequently, or have an online advisery service. Therefore, you should be able to access your software from anywhere in the world – don’t be limited to set locations.
Automatic data ingestion and classification
Commission-based software should automate the repetition of manually adding client and commission data. It would be best not to have to upload or categorise anything manually.
A software worth its weight should pull all necessary information from connected data sources like a dedicated client inbox or a secure web interface.
Your commission-based software should assist you with all of your reporting needs. This ranges from pre-defined reports to customised reporting, as well as ready-to-use report templates.
It’s not enough to have greater end-to-end visibility of your commission streams. As an IFA, growth and revenue maximisation are your biggest concerns.
You also need:
- The necessary data to assess commission trends,
- To identify unusual spikes, and
- Get insight from your revenue data to help you develop actionable strategies in response.
The best commission management software in 2022
Commspace offers the leading South African commission management software in 2022. They provide all the above capabilities and more to make managing multiple client accounts and revenue streams a seamless, automated process.
At the end of the day, deciding how you’re going to structure your commission and fees will depend on your preferences and the type of service you want to offer your clients.
However, when it comes to managing your fees, be sure to partner with the best in the business.