Why I deserve my fees?

I recently addressed some IFAs for a Mutual fund house. There were many of them present there – and I met a nice senior person who had spent 3 decades had 3 offices to offer financial services. He was doing very well and continues to do well. In some cases he is now servicing the 3rd generations’ financial requirements.

He says he ‘charges’ clients fees because he gets clients ‘charged’ to take ‘charge’ of their financial lives! Nice one. Here is a summary of his his attitude towards charging fees:

I am quoting him….well almost!

Many people ask me questions which I do answer. Frankly I do not know how should I charge them for the same. Many people who ask me some of these questions greatly benefit from the answers. However charging them a %age of the money they saved / earned seems to be difficult.

Some answers have to be thought out, whereas some answers can be given over phone in 30-45 seconds. So charging them for the time spent can be either very low or irritate the end user no end.

Many of the people who ask questions are people with whom I do have an existing relationship – financial, or non financial. I really cannot charge friends, relatives, or colleagues. So to say ‘Charge only outsiders’ seems difficult to implement, and not remunerative to think of ‘advising’ as a business.

What questions do people ask? I probed. He listed them:

My parents are 60 years old can they get medical insurance? From which insurance company should I take it? (I do not deal with general insurance, and hence actually do not know)

A neighbour is offering a car lease finance scheme. I have to pay Rs. 10 lakhs – and I will get Rs. 18,000 per month for the next 20 years + I will get back my principal. Should I invest? (Mathematically it is not possible to run such a scheme for too long/!)

Should I invest in Gold? Will it give 24% p.a. return for the next 10 years?

My current CTC is Rs. 37 lakhs. A new company is offering Rs. 32 lakhs + Esop worth Rs. 15 lakhs – which I can sell after 3 years for 30 lakhs. Should I take the offer? (3 years later!! Will the company exist?)

I have a home loan with a floating rate (currently 13% p.a.), a car loan (at 15% p.a. flat) a personal loan (at 21%), a credit card loan (which I hope to pay off in 3 months time). My banker has also invested my money in an Income fund (we exited the markets at 12000 – so lucky it then went down to 9000!). Is my RM doing a good job of my portfolio?

so on and so forth….frankly in many of these questions I need 30 seconds to reply. What do I charge? Any suggestions?

After all if I am a doctor I need to be paid on time spent – not for transactions like a chemist!

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6 Responses to “Why I deserve my fees?”

  1. Dr Mohammed Ali Khan on August 22nd, 2009 at 12:27 pm

    Giving sound financial advice involves a lot of reading and years of experience in the field and also keeping up with the latest events.. Its a intellectually taxing job… Just like a Doctor’s job.

    So a good professional financial adviser should take reasonable fees if he has at all to exist in the profession.

    Maybe he should have a monthly or annual subscription scheme.. Or charge per advice given..

    If the entire pay structure in transparent and unambiguous I think that his clients will be happy to do business with him..

  2. I agree with Dr. Khan. Transparency and reasonableness are the keys to an effective, mutually gainful relationship between advisor and client.

  3. I like what Dr. Khan said and what Srikanth have said. Who will decide what is tranparent and reasonable? Will the doctor say “I received a laptop from xyzee pharma company” or “I went on a all expenses paid educational trip with the following companies” or will the financial adviser? What about upfront and trail commission? How about the bank Rel’ship Manager who churns your equity portfolio and sells UL policies to senior citizens? Most important client should know what he wants, adviser should communicate well. A well informed client is a good client – then the fees can be negotiated.

  4. Dr Mohammed Ali Khan on August 22nd, 2009 at 2:28 pm

    As a Doctor who was earlier running a Clinic in Chennai ( I’m now an Anesthetist ).. I know this ” Gifts from the Pharma Company ” first hand. I usually shoo them away. I am interested only in Quality and Low cost of the drugs..
    I did not want gifts.. Patient’s fees was enough for me. That was because I respect my profession.
    I know a lot of my colleagues who accept gifts, foreign tours, laptops and what not..In fact this gift culture is rampant and endemic
    Maybe its the same with financial advicers

  5. Vanga Rajendra Prasad on May 8th, 2013 at 10:52 pm

    I heard- once Picasso charged 500 dollors for drawing a picture in 10 minutes. Person who wanted to take that asked ”500 dollors, for 10 minutes?”. Picasso replied ” No, it took 40 years effort. Fee is for that.” Financial adviser has to spend many hours to update himself. Fee is for that. (Here I wrote the theme as i remember). Charge for charging the receiver is required

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