Posted by: nmarsh June 9th, 2017
But What Does It Cost?
The financial press seems to be constantly focused on the fees charged for financial advice. They are not always concerned just with the size of the fees but also with how they are disclosed and particularly, why firms are not clearly displaying fees on their website.
The debate is supported, to some extent, by findings from the profession’s regulator, the Financial Conduct Authority, who in recent firm file reviews, found that 93% of cases the advice given was suitable but felt that only 50% adequately disclosed the fees being charged. Ashlea wasn’t part of the review but I feel comfortable that we would have fared well, as we believe that we are open and upfront about what we are going to charge.
That being said - we don’t provide detailed fees on our website. So, I guess we have work to do - or do we? It is a debate we frequently have but stand by our decision not to. Let me explain.
It makes sense that when buying something that you would want to know the price before making the purchase. It would be very disconcerting, for example, if Sainsbury’s (other grocery stores are available!) took all their prices off the shelves and didn’t display them online. But when you need some building work done, would you expect to see a quote for exactly what you need waiting on an architect’s website? My guess is not. There would presumably need to be a conversation about what exactly you need and what quality of materials should be used.
And there we have it! If we are to offer a truly bespoke service that fits with the needs of the individual client, quoting standardised pricing upfront doesn’t seem to make much sense.
So how do we charge our clients? First and foremost, we charge on a fee basis and those fees are agreed, with you, before any work is started on your behalf. The fees take several different forms and could be used in combination with each other. We review the level of ongoing fees annually, to check that they make sense based on the value that we are adding.
- A fixed fee for an initial report, or one-off piece of advice;
- An implementation fee charged on a fixed or percentage basis, to design and execute an investment portfolio
- Ongoing fees to monitor and update your plan and the investments that fit with it.
That’s all well and good, I hear you cry – but what does it “actually” cost! Maybe some examples of recent new clients of Ashlea will help.
- A couple in their early 40’s who have some retirement savings but want to make sure they are making adequate provision, for their planned early retirement at age 55. A £1,500 fixed fee for a comprehensive financial review, including a detail assessment of their retirement plans, using cashflow analysis. After completion of the review no changes were required so no further fees at this stage. Scheduled to update the review on an annual basis for further fixed fees.
- A recently divorced lady in her 50’s, who had received a settlement, in the region of, £200,000 and had pension savings of a similar amount. She wanted to get a better picture of her financial future.
- £1,500 for a Comprehensive Financial Review, which used cashflow analysis to provide a level of comfort over her finances and provided a recommendation on how best to invest the settlement proceeds, as well as consolidating her pension investments.
- A 1.5% implementation fee charged on the £200,000 settlement, reduced by the £1,500, already charged for the review (£1,500). No additional charge for the pension transfers.
- A 0.80% (£3,200) ongoing fee, charged annually on the value of the investment and pension portfolios and which will provide for an annual update to her financial review and the monitoring and management of her investments.
- A couple in their 70’s, with a significant investment pot managed by a discretionary fund manager, who were concerned with their ability to fund long term care, should it be needed. A report detailing the potential costs of various forms of care and the impact they will have on the couple’s finances, if required. The report, which cost £2,000, allowed the couple to narrow the choice of care they would like to fund and meant that they felt more comfortable providing gifts to their children now. No investment fees required but a fixed, retainer of £1,500 per year agreed to allow access to ongoing financial advice and updates to the care analysis.
Phew! That was a lot of, hopefully, clear and useful information on how Ashlea charges our clients. Now, you would probably expect, at this point, that we have covered both, everything you will be charged and everything you need to compare us versus other firms, when deciding who to engage. Actually - you have probably realised, by now that nothing is that simple, when it comes to financial advisors and how they charge!
This gives me an idea for my next blog. But What Else Does It Cost and How can I Compare Different Firms?
Stay tuned for the next instalment and make sure to get in touch if anything wasn’t clear or you would like more information on what we can offer.