Restrictions on commission lead to hindrances in fee consulting.
In the ever-changing landscape of business and finance, a significant shift is underway. The growth in fee-based consulting is driven by a combination of evolving client demands and consultants adapting their business models to maximize growth and scalability.
On the Client Side
Increased demand for specialized consulting services, particularly in AI, digital technology, cost reduction, energy, infrastructure, and sector-specific expertise, drives clients to seek fee-based consulting tailored to specific, timely problems rather than broad services. Clients prefer agile and adaptable consultants who offer faster, more customized responses to rapidly changing market and technological conditions, increasing reliance on dynamic, smaller firms and independent experts rather than large firms with less flexibility. Access to specialized expertise via consulting marketplaces allows companies to find top-tier consultants more cost-effectively compared to traditional large consulting firms, often at rates half or less of incumbents, making fee-based engagements attractive for discrete projects or expertise needs.
On the Consultant Side
Consultants are increasingly focusing on specialization and niche positioning to differentiate themselves and attract clients seeking specific problem-solving skills, moving away from generalist models. There is a shift toward scalable, sustainable business models emphasizing value-based pricing, retainer agreements, fractional executive roles, and outcome-based fees instead of traditional hourly billing. These offer more predictable and higher revenue aligned with client outcomes. Consultants leverage AI and technology to enhance capabilities, automate routine tasks, and deliver more personalized, data-driven insights, adding value and justifying fee-based pricing structures. Consulting marketplaces provide consultants instant access to global clients, reducing business development costs, albeit at the cost of platform fees and dependence risks.
The hybrid model, a combination of fee-based and commission-based solutions, is a compelling way for financial advisors to position themselves more independently. Clients expect to gain ideas and suggestions for cost-effective and flexible investment solutions. As clients delve deeper into retirement planning and asset allocation topics, there is a growing need for more flexible concepts to break up rigid first and second pillar retirement models.
The recent increase in fee-based consulting is a response to negative interest rates, rising product costs, and low yields in a low-interest environment. Clients are seeking further consultation due to these challenging market conditions. However, it is not realistic to expect that the majority of financial advisors will switch to a fee-based model overnight. Discussions about limiting commission heights are taking place due to the current economic situation, but a ban on commissions is not beneficial for the industry or fee-based consulting in the long run.
In conclusion, the growth in fee-based consulting arises from a mix of client demand for nimble, specialized expertise delivered cost-effectively and consultants adopting differentiated, value-oriented, and scalable engagement models, supported by digital platforms and AI-enhanced services. This shift promises to bring about a more transparent, client-centric, and flexible approach to consulting services, benefiting both clients and consultants in the long run.
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