Implementation Fees

The implementation fee can be a much higher amount than the initial planning fee, because at this point in your process the client should have already seen the magic (in other words, the value you can add for them). This might be in the form of clarity or certainty about the future, which are very high value for clients, or it might be a more tangible short term saving, like a tax win, or reduced fees on investments and pensions that can be quantified in cash.

If you are investing a lump sum of money, percentage based fees still work.

For example you might charge between 1%-3% of the money invested, depending on:

  • The size of the amount invested.
  • The value you have added to the client.
  • The value the client perceives you have added.
  • The time and effort it took to get the work done.

Other advisers I know charge hourly rates for implementation, or a flat fee agreed between them and the client. These are also perfectly sensible approaches to charging for implementation (although I’m not a huge fan of hourly rate charging per se).

In this part of the process you need to charge a fee that will cover all of your costs up to this point, and make you a profit. In your charging schedule you may wish to have a typical starting position and flex around it slightly on a case by case basis, depending on how the four factors outlined above interact.

If the work is insurance work that can still generate a commission payment, my advice is to take the commission payment in most circumstances, unless you feel that the amount you will be paid is out of all proportion to the time you’ve taken and the value you have added to the client. If there is an amount you feel is over the odds, you can offset it against future fees (like ongoing fees) or rebate some of it to the client. However, don’t sell yourself short on any of this work.

I believe you should charge for the value you add to clients, not the time it takes to do the work. [click to tweet]

For example, a client arrives who is married with two children, debt, loads of expense and very little disposable cash flow. They require £750,000 of life insurance cover. You explain to them that they can go and buy it themselves dirt cheap from Tesco, but when they die the payout is likely to be taxed at 40% because it has not been properly structured (i.e. a cost of £300,000).

Alternatively, they can get you and your team to set it up properly using a trust structure to own the insurance policy. On death the full £750,000 will be available for the client’s family. In this situation the value added is £300,000. If the time taken is minimal, I have to be honest, I’m still comfortable with you taking a significant fee/commission for the job.

I really want you to charge for the value you add, not how long the job takes.

Next week I’ll take a look at ongoing review fees.

Brett Davidson



7 thoughts on “Implementation Fees

  • Brett

    It won’t come as a surprise to you that I don’t agree with you on charging for value, as we have swapped ideas on this before. As we agree, both business models have their merits.

    To fully explain why I prefer a time based model would take a while, but one of the main reasons is I think it it is more professional.

    It was therefore quite a coincidence that ten minutes after I saw your article, I then saw a headline from Jeff Prestridge on the FT Adviser site entitled “More must be done to prove advice value to press and public”. It’s a similar message to my article on Tuesday about the Which? survey.

  • Hi Brett
    I dont understand why you suggest taking the commission on a life insurance policy.
    Usually the cost of the commission to the client is massively more than the amount of the commission paid to the adviser (take the premium for the commission paying product, deduct the premium for the zero commission product, multiply by the (anticipated) term and you’ll get a much bigger number than the commission, apart from in little cases). So commission is usually a bad deal for the adviser and the client.
    When in competition, this is an approach we sometimes take to win business and it helps us to show that we can be transparent and make money for the client (and us) at the insurance company’s expense. Everyone likes that!

  • Chris,

    What constitutes ” professional ” ?

    Most of us and I include the world at large find time based charging as practiced by lawyers and accountants extremely biased towards the ” fee earner ” and is generally the main cause of unhapp9ness with the work done by these people.

    How do you demonstrate value with time based charging ?

    And perhaps on a selfish note how can you build a profitable scalable business using time based models. I have similar thoughts about business models which purport to operate with segmented client banks.

    and to Brett…

    Don’t you think that initial charging and it’s links to commission has had it’s day and that it has no link to value for the client ?
    A modern advisory business should be working on the basis of long term relationships and should have the resources to administer it’s work without upfront charging.
    On your point about protection commission we have found that offering all of our services within our ongoing charging structure has so underpinned our client’s impression of our independence when organising insurance cover or arranging Trust etc.
    It is a bit like being nearly pregnant if you take commission on some activities but not others – if you forgive the analogy !

  • Chris,

    Not sure how commission offset qualifies as a time based model but hey lets not argue about detail.

    Honesty, trustworthiness, and minimum standards are certainly not exclusive to people labelling themselves or their work as ” professional ” . You only have to look at the current levels of complaint involving the Law, medicine and almost every so called ” profession ” in society.

    On a final note I think it is often forgotten that ” professions ” usually get their work through ancient statutes which has allowed them to be uncompetitive in their approach to the public’\ when charging for their work.

  • Chris,

    A final, final note in view of your linking time based with what you call professional behaviour I wonder what we should make of the fact that the entire financial services industry – with the exception of the advisor community – works on a basis of charging on a percentage of assets.

    Are we to be guilty of putting our clients financial arrangements into the hands of people – PROVIDERS & FUND HOUSES – who are less than professional ?


    • I don’t think product manufacturers would ever consider themselves to be professional in the narrow sense Chris refers to.

  • @ Phil Young,

    I do struggle with this concept of only being a bit pregnant whenever it feels convenient.


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