28 – When FUM-fees should be used… and when they should be avoided
But we do not insist. Dover advisers are free to choose FUM-based pricing if it suits them. For advisers who do prefer FUM fees, they work best with clients with an appropriate asset base and who are prepared to pay this type of fee. This will typically be clients with investments in one or more institutionally-provided managed fund or superannuation fund.
The model works most easily when clients are using a platform.
On the flip side, FUM-based fees are not suited to clients who do not have managed investments being held through a platform. For investments other than these, it is more difficult to calculate and charge an FUM-based fee.
Obviously, FUM-based fees are not suited to advice other than investment advice. Other typical services, such as debt management (which has been found in some research to be the main reason that clients seek financial advice), cash flow management, aged care advice, business advice, etc, do not lend themselves to FUM-based fees.
Finally, and very importantly, FUM-based fees are inappropriate where clients simply do not want to pay them. This might sound simplistic, but many clients are wary of fee structures that are percentage-based. For those clients, a project or time based fee structure will be more successful.