Getting your pricing right to achieve the growth and profitability you deserve


It's no secret that the cost of advice has increased in recent years, and research has shown that many advice firms are struggling to meet their EBIT (Earnings Before Interest and Tax) goals, while resourcing their business sufficiently to meet compliance and administration requirements.

Pricing is one of the largest levers a practice has to influence not only profitability, but also their capacity for growth, and yet it remains one of the most elusive elements to master. Adding to the complexity is Standard 7 of the FASEA Code of Ethics that states “…you must satisfy yourself that any fees and charges that the client must pay are fair and reasonable and represent value for money”. In the current environment, where advice firms have little or no ‘passive revenue’ anymore, and where clients must explicitly renew their services each year, getting your pricing right could be the difference between business success or failure.

BT recently engaged Elixir Consulting to deliver a webinar and share their top tips with advisers on how to master their pricing. Consultants Lana Clark and Monique le Roux share a summary of these tips here.

Elements of a pricing model

When designing a pricing model to be fit for purpose and fit for the future, there are a number of elements to consider. There is no single answer to what is the ‘right’ or ‘best’ pricing model that an advice firm can implement other than to say it should be one that is well-designed to suit the client base, value proposition, cost base and vision of the business owners and applied in a way so that every client is profitable. If a client is not profitable, there should be a conscious decision about their retention, and the overall revenue must be well managed so as to remain sustainable. Beyond that, whether you use a fixed, asset-based or hybrid model, how you structure the timing of your fee collection, how much you charge and how you calculate the fee for each client could vary from one firm to the next.

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The most successful pricing models are created after considering the elements of the business that are intrinsically linked to pricing, and on the future vision of the business. Take a close look at the following areas before you even start with pricing:

  • Who is your target client?
  • What is the value proposition?
  • What is the client experience when they first engage you, and do they re-engage as an ongoing client?
  • Do you intend to deliver transactional advice when required, or purely long-term advice relationships with annual re-engagement?
  • What profit margin are you seeking to deliver your vision for the business and reward you for the risk and sacrifices you make as an advice business owner?
  • What are your future expenses? E.g. growing the capacity of the team, investing in technology (either upgrading, updating or driving more efficiencies), training and development for team members or getting external specialists help to drive the business forward.

Building your pricing model

When it comes to building a pricing model, Elixir recommends that you start by understanding the costs to deliver your services in order to determine your Minimum Recoverable Amount (MRA) and build from there.

The first step is determining charge-out rates for each role in your business. The charge-out rate for different team members should vary as skills, expertise, education and value delivered to clients will vary from role to role. At the very least, you may want a different rate for advisers and admin support, potentially paraplanning (if you in-source), associate adviser, senior adviser etc.

One of the fundamentals of efficient practice management is aligning the right people to the right role, completing the right task and this can be key to determining accurate pricing to ensure your clients aren’t paying unnecessarily high fees.

Some key tips for determining charge-out rates:

  • When determining your charge-out rates you’ll want to factor in all the costs of your business, not only the employment costs, and add your desired profit margin.
  • You’ll also need to consider the quantity of chargeable time in your business. Chargeable time is that spent on work that can be attributed to an actual client.
Role Example of chargeable work
Adviser Client meetings, completing file notes, preparing paraplanning instructions, phone calls with clients.
Paraplanner Preparing advice documents, product comparisons, cash flow/capital adequacy modelling.
Client Service Research, insurance quotes, 3rd party follow ups, managing outstanding requirements, managing claims, phone calls with clients.

Many businesses underestimate the amount of non-chargeable time staff have in an advice business and the amount of time it takes to complete different tasks. Whilst it can vary from one client to the next, if you involve your team in the conversation, you should be able to determine the ‘typical’ time for your practice to complete tasks.

Also consider how many weeks your staff can work.

Everyone has 52 weeks in a year but consider:

  • Public holidays – 2 weeks
  • Annual leave – 4 weeks
  • Sick/carers leave – while many staff don’t use it all, by law you must allow them 10 days paid leave for full-time employees and pro-rata for part-time employees*
  • Internal meetings -?
  • Audit and compliance-?
  • CPD-?
  • PD days and/or Conferences-?
  • Study leave-?
  • Management and/or RM duties -?

These are all non-chargeable hours. For some practices, there may only be forty-four chargeable weeks in a year, and the actual time will vary between staff members.

  • Once you have calculated the processing times for different team members to deliver advice and service, then determine your charge-out rates. While each client may vary, you’ll know there are some standard steps that must be completed for every client, regardless of their situation (i.e., fact find, research, modelling etc.)
  • Calculate your Minimum Recoverable Amount for serving a typical new client, and the base level of services you provide for an annual service agreement.

Constructing the Fee Model

Elixir suggests using a customisable structure that allows advisers to calculate the ‘right’ fee for each client, using a formula:

Minimum Recoverable Amount + Complexity + Variable factors + Value overlay = The Fee

1. Minimum Recoverable Amount (MRA) – the minimum base fee (including profit margin) that covers your service to onboard a new client or provide ongoing advice and service for a ‘standard’ client of your firm.
2. Complexity - these factors might vary from one client to the next, based on their needs, where a firm provides more time, service, specialist knowledge and/or experience. They may even include a third party to support the client in some way. For example, unless a firm specialises in Self-Managed Superannuation Funds (SMSF) they are not likely to include the additional work required to advise on an SMSF in their base fee, rather it would be added where appropriate.
3. Variable factors
a. one example of variable pricing might be in an Asset-Support premium. Some firms apply this premium to the assets they manage directly, others apply it to their client’s entire investable assets; while they may not manage it all as funds under management, they’re providing expert advice on cashflow management, structuring, debt management and they’re helping clients make decisions about all their assets regardless of whether they’re in property, business, cash, etc. An Asset-Support premium is generally between 0.2 - 0.5% on top of the fixed fees.
4. Value overlay – the value overlay is sometimes known as the ‘art’ of pricing, largely because perceived value really comes down to the individual. Clients come to an adviser seeking solutions – time is one thing, but the advisers’ intellectual property and ability to consistently coach them in making the right decisions about their money, is valued. The value overlay can be the most difficult to navigate when determining a pricing model, and when applied, is often applied as a percentage premium (e.g. 10 or 20%) to the calculated fee.

Elxir recommends developing a calculator for internal use by the firm, and the client is quoted the number that is determined (rather than the underlying components). The end result for each client must meet standard 7 by representing value for money.

Implementing a pricing model

Once a pricing model has been decided, here are a few tips from Elixir to set your practice up for success:

  • Build a pricing ‘playbook’ - these are the business rules around pricing for the firm and will help maintain consistency across advisers and the client base.
  • Build a pricing calculator for all advisers in the firm to use that follows the business rules around the pricing model and how to apply pricing to each client’s unique circumstances.
  • Timing is everything when it comes to implementing a new pricing model especially with existing clients. Whilst a small across-the-board uplift (of say, 10%) has been implemented by some firms via mass email and chasing up consent signatures, a fee uplift conversation is best had either at review time or when new advice is required within the service period.
  • Where a practice has a significant number of clients who no longer require full services and/or won’t get value from the new minimum fee required, a staged implementation process should be employed, to maintain financial stability through the transition. A practice may decide to continue services to certain clients under an existing minimum fee arrangement until their next review, at which time they decide the best course of action for each client. Each firm will be different, however, think in terms of the number of clients you’re able to switch off per new client coming into the current business model. The mindset to maintain here is one of growth and sustainability, letting go to bring more of the right types of clients in.

Some Final Words

Lana best sums it up. “In the 15+ years we’ve worked with advice firms, there is rarely someone who is not challenged in some way by pricing. The important thing to remember is that a pricing model is unique to each firm. Every firm has different offerings, expenses and processes; therefore, fees are invariably fit for purpose to each firm. Pricing can be overthought, or not thought of enough, or sometimes advisers find they’re paralysed to the point of giving up – deep work is required to get it right. It’s not a project that anyone should take lightly and can sometimes take months to get the model right, let alone implement it.

Get your numbers and your process right, be consistent with pricing and follow through on your pricing project. One thing we know for sure is that those who are thorough in their design and then follow through on a pricing project, and update it regularly will reap the benefits and never look back.”

After a period of unparalleled change and disruption for financial planners, the future now looks incredibly bright. We are entering a period expected to have less legislative change, providing more certainty and stability for advice businesses.
There’s an increased demand for financial advice, but are advisers seizing the opportunity? The frustrations of many advisers to efficiently serve more clients is leading many practices to seek new ways to lift their capacity. For this article, we engaged the team at Elixir Consulting to share some valuable insights on effective ways financial advice businesses can increase capacity.
In two recent articles, we have been focussing on sustainable growth for advice businesses as we enter a period of intergenerational wealth transfer. Andrew Inwood from Core Data outlined the risks and opportunities based on research from his firm, as well as lessons we can learn from advice firms in the UK that are further along on a similar journey.



Information current as at 31 March 2023. This paper has been prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian Credit Licence 233714 (Westpac). The information contained in this publication provides an overview or summary only and should not be considered a comprehensive statement on any matter or relied upon as such. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, the Westpac Group accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material. This communication has been prepared for use by advisers only. It must not be made available to any client and any information in it must not be communicated to any client.