As a freelance professional or small business owner, quoting for your services is one of the trickiest things to master. Go in too low and you’ll deprive yourself of well-deserved income, yet price yourself too high and you could scare away customers.
Thankfully, there are ways to work out reasonable quotes for your services that balance profit and affordability.
Independent financial advisers (IFAs) and accountants spend their time helping customers manage and maximise their money. Without their expert advice and reliable services, many individuals and small businesses would be at risk of getting complex matters like tax, invoicing, investments and pensions completely wrong.
Ironically, one of the trickiest parts of being a self-employed accountant or IFA is understanding the financial side – particularly how to quote for your services.
We’ve put together a comprehensive guide to quoting for your services as an accountant or IFA. From pricing competitively to working out whether to charge flat fees or percentage-based costs, here’s everything you need to know.
Your first port of call should be to understand what other professionals offering the same services are charging. If you set your rates well above or below the average, you could struggle to find clients or turn a profit. Start by looking at what other advisers in your area are charging and aim for a figure that’s similar.
Get specific when you’re doing your research. If you’re a relatively new independent financial adviser who has recently qualified, looking at rates charged by IFAs with decades of experience will be completely misleading.
The same goes for accountants and advisers who offer specialist or niche services, such as investing in alternative asset classes or advising on offshore tax matters. Customers won’t be prepared to pay the same amount for comparatively simple services like bookkeeping or invoice management.
But if you do offer advice and services that require extra qualifications or specific knowledge, don’t be afraid to charge what your services are worth.
If the information isn’t readily available on other advisers’ websites, ask friends and family about their experiences or check out forums to get a better idea of typical fees. You can also find out more about how much accountants charge and typical independent financial adviser fees in our previous articles.
Since the introduction of new rules under the 2021 Retail Distribution Review, IFAs are no longer allowed to be paid through commission. Instead, they must charge their clients directly, rather than passing on the cost of commission indirectly.
One thing you don’t have to do though is display your prices upfront, which is useful if you prefer to charge on a per-case basis.
There are no specific rules in place for accountants regarding how your clients pay you or whether you display your prices or not. If you offer set services, such as end of year tax return filing, you could display a cost menu for standard work. But you may find it easier to charge on a per-hour basis or to decide costs after chatting to each specific client.
As an accountant or financial adviser, you will likely have different ways of quoting for different types of services. For example, it makes sense to charge per hour for one-off or annual consultations, as your customers will be paying for your time and advice.
But if you’re actively carrying out work for them, such as managing an investment portfolio or handling their invoices, it’s going to be easier to charge a fee that’s based on your work rather than time.
Let’s say you’re an accountant who handles every aspect of your clients’ business’ finances, from invoicing to tax to payroll. It’s going to be more efficient to bill them one amount each month for the services you provide, rather than having to diligently note down the hours you’ve spent on which accounts.
When quoting for per service work, you’ll also need to consider whether a percentage-based system or flat fees are more appropriate for your work. For lots of advisers, a mixture of the two will be required, depending on the kinds of services you offer.
Let’s say you’re a financial adviser who’s managing your customer’s portfolio, which requires you to use your expertise and spend time tracking and analysing market performance.
It’s typical to charge a percentage of the assets under management, as your work will be carried out on an ongoing basis throughout the year, rather than during set chargeable hours.
According to the Financial Conduct Authority (FCA), the average percentage financial advisers charge is 2.4% of the value of your assets or investment funds. It’s also typical to charge 0.8% for ongoing advice, such as quick telephone and email advice, that don’t warrant hourly charges on their own.
Advisers may also charge a lower percentage for high-net-worth customers, as they can achieve an income that’s still good with a lower fee rate.
If you’re lucky enough to secure clients who run big businesses or who have multi-million-pound assets or investment funds, it’s worth reconsidering your fees. Using economies of scale, you’ll be able to offer them more attractive rates and potentially provide extra services while still earning a great income.
Let’s say you’re an accountant who typically charges £100 per month to carry out payroll services for 10 employees. If you’re approached by a client with 1,000 employees, your first instinct may be to multiply the price by 100, adding up to an annual bill of £120,000 for just one area of accounts.
Lowering your rates will help you bag a lucrative contract and still enjoy impressive income without pricing yourself out of clients’ reach.
An IFA could also find themselves in a similar situation. If a client would like you to look after a £1 million investment portfolio, your usual management fee percentage of 3% could become quite steep. Adjusting it to 1.5%, for example, will still net you £15,000 per year from a very lucrative client.
If you’re running a business and are looking for helpful advice and ways to generate new leads, check out Unbiased PRO. Join the 27,000 independent financial advisers who use Unbiased to grow their business. Discover the plan that’s right for you.