Scale of charges for IFA
Discussion
I'm hoping to get a feel for how typical and reasonable the following charges are for ongoing advice. My IFA is proposing a scheme whereby I pay around £120 per month for ongoing advice, plus a sliding scale of charges which apply when an investment is executed, ranging from 3% of first £25K invested, and 2% of next £75K invested, with reducing charges thereafter.
As I understand it, both sets of charges apply, so if I do nothing for a year, I would still pay £1,440. Equally, if I'm advised to make an investment, I'm paying to be advised, and then paying for the execution of the advice.
Is this a common mode of charging now that IFAs don't get paid directly by fund providers and, if so, do these rates seem reasonable?
As I understand it, both sets of charges apply, so if I do nothing for a year, I would still pay £1,440. Equally, if I'm advised to make an investment, I'm paying to be advised, and then paying for the execution of the advice.
Is this a common mode of charging now that IFAs don't get paid directly by fund providers and, if so, do these rates seem reasonable?
The advisory space has changed from one of selling the idea of investing, to managing investments. The buzz is no longer in nailing a sale and bringing home the 2/3% upfront, but growing a volume of assets under management that can be nurtured, grown and of benefit to the client.
I usually charge an initial flat fee of a few hundred quid for arranging investments to cover staff, admin, indemnity etc.. and that's about it. I don't charge upfront percentages or do sliding scales.. it's confusing and has the whiff of opportunism and greed. If I went for a haircut or bought a pint, the barber or barman wouldn't take into account my net worth before settling my bill, so similarly, why should I see a client as a mark?
Thereafter, the client pays an amount each year to cover costs and show me a profit. I am relaxed about the frequency of meetings, don't charge for fund switches etc. I would like to evolve my business into a flat fee arrangement but I find it difficult to pin down a set fee which doesn't result in clients cross subsidising each other. Honestly, my brain hurts with how complex this has become!
Consider if you want an ongoing service. And this is a truism.. it isn't just about the money. You have to get on with your adviser and although it's not a question of a duplicitously obsequious or overly fawning adviser ingratiating himself with you simply to spunk an excessive fee; rather, is the fee that he (or she) charges representative of value, service and return that you find acceptable? Could you find that same service, cheaper, with the likes of H-L for instance. You might be with these guys for years.. do you like them, do you trust them?
A lot of people find financial services to be full of ostentatious, money grabbing w
keurs. And let's face it, they'd be right. But advisers are also in business to do business and it costs - more so, doing it diligently and applying ever increasing levels of professionalism. We also have to maintain a certain measure of capital adequacy (money held on account) to show that we are solvent and not motivated to sell daft products at inflated prices to ensure we don't align your interests with ours; ie, to simply keep the wolf from the door.
Shop around.. take an informed view and although you'll never know for sure until it's probably too late if the merde hits the fan, start off slowly. Don't be afraid to drip feed the adviser small amounts to begin with. If they're good with small amounts, it might give you faith to increase your exposure over time. Whatever you do, don't pay an ongoing fee for an adviser you never hear from or who rations you to the idiotic, clock watching annual review. I enjoy my clients company, you should enjoy and be able to appreciate their's too (if that's what you value).
If my kids can reach me, my clients can too. Empathy is everything - if you are moderately curious or worried about something, you won't phone your client late on Saturday night I guess, but can you text him with the reasonable certainty he'll pick it up and get back to you quickly if it's urgent or when his hangover has dissipated on Sunday, if it's not?
I know instinctively (I hope I do) what makes my clients tick - I enjoy seeing them benefit, I appreciate the kudos and their smiles and I know when to suck up a rant or a damned good boll0cking if one would be ever due. Similarly, they know me well enough (I hope) to know that I exist for their benefit (I can't be done with this modern human rights bolleaux) and that they pay for the roof over my head.
If your needs are relatively simple, why pay for an expensive service. If all you want to do is stash some money into a passive set of trackers to fire and forget, why bother with paying for regular reviews, those banal newsletters or annual client days out at the races or an excessive amount upfront which as analogies go, equates to buying Bilt Hamber to detail the paint of a cheap, clapped out junker? Similarly, if your needs are complex, do you really want to spoil the ship for a ha'porth of tar?
Good luck. Remember - you are buying a service. Keywords: You, buying, service. I now have a day in the office doing fund research, pension transfer thrashing out and yet more CPD. Be still, my beating heart.
I usually charge an initial flat fee of a few hundred quid for arranging investments to cover staff, admin, indemnity etc.. and that's about it. I don't charge upfront percentages or do sliding scales.. it's confusing and has the whiff of opportunism and greed. If I went for a haircut or bought a pint, the barber or barman wouldn't take into account my net worth before settling my bill, so similarly, why should I see a client as a mark?
Thereafter, the client pays an amount each year to cover costs and show me a profit. I am relaxed about the frequency of meetings, don't charge for fund switches etc. I would like to evolve my business into a flat fee arrangement but I find it difficult to pin down a set fee which doesn't result in clients cross subsidising each other. Honestly, my brain hurts with how complex this has become!
Consider if you want an ongoing service. And this is a truism.. it isn't just about the money. You have to get on with your adviser and although it's not a question of a duplicitously obsequious or overly fawning adviser ingratiating himself with you simply to spunk an excessive fee; rather, is the fee that he (or she) charges representative of value, service and return that you find acceptable? Could you find that same service, cheaper, with the likes of H-L for instance. You might be with these guys for years.. do you like them, do you trust them?
A lot of people find financial services to be full of ostentatious, money grabbing w
keurs. And let's face it, they'd be right. But advisers are also in business to do business and it costs - more so, doing it diligently and applying ever increasing levels of professionalism. We also have to maintain a certain measure of capital adequacy (money held on account) to show that we are solvent and not motivated to sell daft products at inflated prices to ensure we don't align your interests with ours; ie, to simply keep the wolf from the door. Shop around.. take an informed view and although you'll never know for sure until it's probably too late if the merde hits the fan, start off slowly. Don't be afraid to drip feed the adviser small amounts to begin with. If they're good with small amounts, it might give you faith to increase your exposure over time. Whatever you do, don't pay an ongoing fee for an adviser you never hear from or who rations you to the idiotic, clock watching annual review. I enjoy my clients company, you should enjoy and be able to appreciate their's too (if that's what you value).
If my kids can reach me, my clients can too. Empathy is everything - if you are moderately curious or worried about something, you won't phone your client late on Saturday night I guess, but can you text him with the reasonable certainty he'll pick it up and get back to you quickly if it's urgent or when his hangover has dissipated on Sunday, if it's not?
I know instinctively (I hope I do) what makes my clients tick - I enjoy seeing them benefit, I appreciate the kudos and their smiles and I know when to suck up a rant or a damned good boll0cking if one would be ever due. Similarly, they know me well enough (I hope) to know that I exist for their benefit (I can't be done with this modern human rights bolleaux) and that they pay for the roof over my head.
If your needs are relatively simple, why pay for an expensive service. If all you want to do is stash some money into a passive set of trackers to fire and forget, why bother with paying for regular reviews, those banal newsletters or annual client days out at the races or an excessive amount upfront which as analogies go, equates to buying Bilt Hamber to detail the paint of a cheap, clapped out junker? Similarly, if your needs are complex, do you really want to spoil the ship for a ha'porth of tar?
Good luck. Remember - you are buying a service. Keywords: You, buying, service. I now have a day in the office doing fund research, pension transfer thrashing out and yet more CPD. Be still, my beating heart.
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