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Is increasing client fees to manage rising operational costs an option?

Journalist: Ima Jackson-Obot, FTAdviser

ended 15. February 2023

Hello advisers, 

A recent study of advisers - on how they plan to manage rising operational costs from rising energy bills and labour costs at a time of anticipated reduction in revenue owing to clients’ invested assets decreasing in value or because they were withdrawing more from their investments - found that 26% were increasing client fees to manage cost pressures. 29% are relocating offices while 28% are investing in new platform technology. What do you think the impact of increasing fees will be on adviser-client relationships etc..? Are relocating offices and investing in new platform technology viable options? How do you plan to meet cost pressures? Thanks.

2 responses from the Newspage community

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Wes WilkesVerified
CEO at IronMarket Wealth
My gut instinct is that costs are a function of expenditure, not income and any advice firm should have those well under control, including a buffer to support any increased costs, built in. After all, advisers are supposed to be experts in planning, right?
Having said that, there are so many different business models and firm size that potentially a 'one-man band', working from home on a fixed fee basis may have different pressures. I imagine that whilst clients understand what's going on (with rising costs etc), I'm not sure it's something advisers, planners or wealth managers would consider ahead of better efficiencies internally to reduce costs and improve their offering.
In our experience, as our mainly business owners, they want and enjoy seeing us grow, develop and be profitable.
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Steven Rowe0
Director at Lucent Financial Planning
Increasing fees to overcome additional costs is justified as it is important that a financial advice firm is profitable. For clients, there is longevity of the firm so that advice is there for long term and also so their advice is protected by maintaining liability should something go wrong. An adviser in financial trouble is more likely to give duff advice if they are focussing ‘getting the sale’. However, this depends on the fee model. If fixed fees then the above stands. If a percentage of assets, then it’s not playing the game to the rules agreed at outset. Which are, that the adviser profits when the client profits and shares the pain when values fall.
All improvements for cost reduction should be exploited. Raising client fees should be the last option once operating costs are minimized to give best value. Anything else is lazy.