It is not hard to find rude comments about the cost of financial advice in the media and a lot of it is justified. A number of surveys suggest that the expectation of high costs is putting people off seeking advice even though they sorely need it.
As fee-based advisers, who justify our charges on a time and resources basis, we consider that we offer excellent value for money. However, we find that potential clients do not always appreciate the difference between a seemingly low percentage based adviser fee with a cost expressed as absolute £.s.d.
We encourage potential clients to meet with a number of advisers before making a decision and part of the decision making process of course is cost. And here our feedback is that many of our industry colleagues quote an initial cost of 3% with no other explanation, and unfortunately not everyone takes the time to calculate what 3% means in cash terms.
“Never confuse a low % with a low £.s.d!”
Let’s look at an investment of £150,000.
A 3% initial fee would be £4,500 and this may well have an on-going charge of 1%, or £1500; call it £6,000 in total costs to the end of year 1.
Our charge would be £1,500 as an initial fee based on time to evaluate; research; report and present and 0.5% - 0.75% per annum as an account servicing charge. This would give a full first 12 months charge of £2,625, a saving of about 56%.
Therefore comparing like for like, our initial fee in this example is 1%, not the 3% quoted elsewhere! The longer you hold the investment, the cheaper it will be for you, compared to the alternative.
“It only sounds a lot because we have put it in £.s.d!”
A further thought; once you have a platform investment it is unlikely we will change the wrapper at a cost to you, so there are no further initial charges to pay. “Churning”, or pushing investment changes to generate initial fees, does not fit our ethos and is not to our advantage. As we make a nominal amount on the initial fee, we look for long-term stability to make our business model work.
However it is not all about the money! Less objective issues such as trust, service, performance, longevity of relationship, and ethos are arguably more important, particularly for the smaller investor and those starting out on their financial journey.
We believe we charge a fair rate for a fair days work. We know that historically our performance makes our service outstanding value, but of course we have to state that this does not guarantee future performance. However, what we can guarantee is our transparency, ethos and the ability to give our clients confidence that we are here to support the fulfillment of their aspirations.
As I said - Its not really about the money - but the fee element of any advisers offering must surely be fair, transparent and justifiable.
If you would like to know more about how we can help you plan and realise your financial goals then contact us at firstname.lastname@example.org or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.