A potential client has contacted one of our advisers asking about our costs as they have been quoted 3% initial cost and 1% ongoing costs elsewhere. In their circumstances, this means paying out more than £16,000 for advice costs in the first year. The potential client knows our adviser personally and has a background in banking, so a rival firm quoting a percentage rather than cold, hard cash does little to conceal the ludicrousness of paying £16,000 for less than 20 hours actual work!
Putting this in context, £16,000 is more than national minimum wage for one person for one year!* Even though all advisers will want to be paid much more than minimum wage, a sensible cost based on time taken and skill needed, a good working definition for a profession, should not be this much.
In our opinion, anything other than charging a fixed fee, agreed in advance, is “commission” by another name; charges should reflect the magnitude of the work entailed, not what the market will stand or a similar figure to the commission that used to be generated, pre RDR!
For this particular client, quoted £16,000 by a rival, our costs would be under £1,750, with 3rd party specialist costs taking the final bill to £7,000.
There is no compromise in quality of advice when coming to us, as opposed to our more expensive rivals; we have low overheads, heavily automated systems, independent advice backed by industry standard research tools and qualified advisers. Why pay more for the same?
Our disclosure documents say “Our fee for recommending and analysing and arranging a new pension/investment or platform service is typically 1% with a minimum of £1000”. In practice, our fee will reflect the work we have to do, not what our rivals see as a “market rate”.
Once you are our client, you will not be charged again for old work. Once we have set up your pension or platform investment, running changes to that will be covered by our ongoing charge of 0.75%. If you add a new ISA, pension or other novel investment, we will make an initial charge reflecting the hours concerned, (typically £140 for an ISA), but we will not close one investment and open a new one to generate a new initial fee. It does not fit our business model; we are looking for a long-term business relationship, where our costs are kept as low as are sustainable and we make money by retaining happy clients rather than always out hunting for new ones.
If you are looking for an IFA, go out and see a few; ask for a quote and if given an answer like “3% initial and 1% ongoing”, turn it into an actual number. Then talk to us; we will be clear, fair and not evasive; we will give you an actual number for an initial fee and we will stick to it!
If you would like to know more about how we can help you plan and realise your financial goals then contact us at email@example.com 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.
*(£7.50 (minimum wage for over 25 years old from 01/04/2017) x 35 (hours per week) x 52 (weeks in a year) = £13,650)