We aim to make things as fair as possible, here’s how:
£s, not %
A % fee might be appropriate for one-off transactions but that’s not what financial planning is about. What we are paid should be based on what we do, not what you are worth. We work at a very human level with with many moving parts. We are not selling widgets at a margin.
For example, is looking after a couple with £1m across six accounts more or less work than a single person with £2m across three?
The latter could be paying twice the amount of the former. Yet the former has more people and accounts, and therefore more to consider and manage.
% fees can also lead to conflicts of interest:
- Ignoring and/or being disinterested in anything that’s not invested, e.g., you could easily blow yourself up with your “off-plan” activities that we have no influence over;
- Being beholden to market fluctuations when it comes to knowing what our revenue will be, and therefore having to cut services/staff levels accordingly. Or worse yet, having to take on new clients at any price to make up the difference;
- Having our judgement influenced by how we earn our income, particularly when it comes to investment and product decisions and withdrawal/income strategies, e.g., recommending the course of action that best suits our (income) interests as opposed to your interests.
There are distinct phases in the way we work – review, plan and forecast, recommend and implement and then manage.
Each should be charged separately and be profitable; having one subsidise another can skew recommendations.
You can’t and shouldn’t trust the outcome of a “free” review, it’s bound to recommend action.
“What for?”, not “How much?”
We are less concerned about people knowing exactly HOW much they will pay than know WHAT they will be paying for.
We will always confirm the final, capped fee before we commit to each other.
In arrears, not in advance
Continuing the point above, until you see what we do and feel it is right for you, why should you pay us?
Aren’t we much better motivated to do an excellent job for you in expectation of being paid, rather than having been paid in advance?
I would like my family what you want for yours; i.e. an income of £XXX pm from age YY plus the security that, should the worst happen, my family is protected if I don’t reach age YY.
I know how much we need to save each month to make that outcome very likely. To that, I add what I need to earn today to run our household and live a comfortable life. To that I add the cost of running a business – staff, rent, insurances, etc.
That adds up to a large number which should be shared equitably between you.
There are a limited number of clients we can look after properly. It’s in your best interests that we don’t spread ourselves too thinly, so we divide that large number by the number of clients we can look after.
The final step is to take into account the complexity of your financial plan and the amount by which we expect to improve your likely outcome, compared to you managing your own affairs.
And so we arrive at a figure that is equitable and takes into account your particular circumstances. What could be fairer than that?
You could do what we do simply go online, the internet abounds with help and advice. Similarly, we can read up on dentistry or aorta repairs. But we choose not to because there’s just too much riding on the outcome, so we defer to an expert.
When it comes to your family’s finances and the many decades they need careful stewardship, we are that expert.