Tuesday, March 1, 2022

Adding (or bundling of facilitation) fees**

One issue that arises relatively regularly is where advisers looking to facilitate legal solutions have different options for communicating pricing to the end user client.

There is nothing at law that prohibits a 'bundled' price to be given to a client - i.e. one total fee for all work in relation to delivery of a particular solution (for example, estate planning).

However, the licensees for many financial planners and risk advisers do effectively prohibit bundling of fees unless written consent is provided in a particular factual scenario.

The approach of most licensees is to allow one of two alternative approaches, namely:
  1. 'mailbox' approach - this alternative effectively sees the adviser act as a mailbox for the client. The adviser receives an invoice addressed to the client from the third party provider and simply on sends the invoice to the client for payment. Generally, this invoice is sent together with the facilitation fee invoice.
  2. 'disbursements' approach – under this method the adviser will incur the third party fees directly for the client. The adviser then provides one invoice to the client itemising each discrete cost, and in particular, listing the facilitation fee and the legal fees each as a standalone item.
While to our knowledge there is no mandated approach, our experience is that most advisers seem to adopt the disbursements alternative.

There are a number of reasons we see for this, including:
  1. It is administratively simpler for the adviser.
  2. Similarly, it is often far simpler for the client, as they have one invoice that relates to all of the work.
  3. The approach generally reflects what is happening in a practical sense - i.e. the adviser is responsible for facilitating the entire process.
  4. In some instances, there can be indirect benefits to the facilitator - for example, under credit card loyalty programs.
** for the trainspotters, the title today is riffed from the 10,000 Maniacs song ‘Dust bowl’.

View hear (sic):