If you paid your financial experts solely on the basis of a percentage of the benefit to you of their recommendations, what percentage would you prepared to give them?
I just had a conversation with a client who I sense is very fee conscious. Fee appears to be the major, initial focus and by comparison benefits seem to be almost overlooked. Conversion of my dollar based, fixed fee to a percentage of tangible benefit was one of the things discussed. (That’s ignoring all of the intangible benefits of advice, which you can check out here.)
If a financial adviser recommended a strategy to you that gave you a benefit of $10,000 this year how much would you be prepared to pay them for that advice? Would you consider a 60:40 split (i.e. you pay them $6,000)? Or would you be prepared to share more or less with them?
Having now voted please consider this analogous situation. How much of your employer’s total revenue (income) do you expect them to pay in total wages to their work force?
Is it reasonable to set the split exactly the same as the split you suggested above, or do you think it is more reasonable to be higher or lower?
In considering your answers to the questions I have posed you may find the following statistic interesting. It is my understanding that on average around 30% to 35% of total revenue is spent on remunerating and rewarding the workforce.
Does that change your answer at all?