Advice For Transitioning To A Fee-Based Practice + Get Some Love

Kate McCaffery of The Insurance & Investment Journal recently interviewed me about Advice For Transitioning To A Fee-Based Practice.

If regulators are saying they believe embedded commissions encourage “sub-optimal behaviour,” now may well be the time to consider fee-for-service compensation with new seriousness.

The old discussion has new life and a brand-new sense of urgency after the Canadian Securities Administrators’ announced in January that it could take the industry down the same path forged by Australia and Britain, where embedded commissions are banned outright today.

Shortly after the New Year, the CSA issued a 169-page consultation paper on banning embedded commissions, a push which should have many thinking about the viability of their practices going forward. The consultation paper is available on the Ontario Securities Commission’s website. Comments in writing are due on or before June 9, 2017.

Where advisors of the past had few guideposts to suggest their best course of action when moving from commissions to a fee-for-service business, those making the switch in 2017 will be in a relatively fortunate position where it is possible to learn from those who’ve gone before.

Business owner’s mentality

“People who do it successfully, at least the people I’ve seen who have done it successfully, they have a business owner’s mentality, not the mentality of someone who just wants to create a job for themselves,” says Scott Plaskett, CFP, senior planner and CEO of Ironshield Financial Planning. “You need to have that business owner mentality.”

Added to the shift instigated by regulators this year, other fee-only advisors say clients are savvier than ever when it comes to fees. Jason Heath, CFP and managing director of Objective Financial Partners Inc. says consumers are more willing than ever to pay for financial advice, in particular.

“A lot of people are asking about ETFs and things like that,” he adds. “You’ve got to talk to them about ETFs and robo advisors, and the competing alternatives for whatever services you’re providing. You might as well talk about it and be paid for the conversation, rather than avoid it.”

“I find, when you’re fee-only, clients don’t worry about what you’re pitching or what your conflicts of interest are, because there aren’t any. I don’t feel like a sales person when I’m selling somebody on my services. I would feel like a salesperson if I were trying to sell them on a mutual fund or an insurance policy.”

Read the entire article, Advice For Transitioning To A Fee-Based Practice.