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Fees focus: 12 advice firms explain their charges

12 cover stars from 2017 explain how they charge for advice.

Nicola and Jennifer Ellis, directors, Wellington Wealth

Glasgow-based Wellington Wealth charges fees based on assets under management, but will also take complexity and time costs into account. For initial engagements, the firm charges on a time-costed and pre-agreed basis before assessing a client’s situation.

Should the client wish to proceed, a 1.5% initial fee will be charged. Nicola accepts there is some flexibility on the percentage charge, and that it can range from 1% to 1.5% in practise, depending on the nature of the work involved.

For ongoing fees, Wellington currently charges 0.5% for clients with investable assets worth over £1 million, 0.65% for clients with assets between £500,000 and £1 million, and 0.75% for clients with less than £500,000. However, these figures have recently been revised, and will be rising to 0.75%, 0.85% and 0.95% respectively.

The rise in fees comes as part of plans to improve the ongoing proposition, including the launch of an online client portal, and a new client newsletter.

Wellington also offers time-costed fixed-fee and percentage options, should the client have a particular preference.

Nicola and Jennifer Ellis, directors, Wellington Wealth

Glasgow-based Wellington Wealth charges fees based on assets under management, but will also take complexity and time costs into account. For initial engagements, the firm charges on a time-costed and pre-agreed basis before assessing a client’s situation.

Should the client wish to proceed, a 1.5% initial fee will be charged. Nicola accepts there is some flexibility on the percentage charge, and that it can range from 1% to 1.5% in practise, depending on the nature of the work involved.

For ongoing fees, Wellington currently charges 0.5% for clients with investable assets worth over £1 million, 0.65% for clients with assets between £500,000 and £1 million, and 0.75% for clients with less than £500,000. However, these figures have recently been revised, and will be rising to 0.75%, 0.85% and 0.95% respectively.

The rise in fees comes as part of plans to improve the ongoing proposition, including the launch of an online client portal, and a new client newsletter.

Wellington also offers time-costed fixed-fee and percentage options, should the client have a particular preference.

Cliff Patterson and Louise Morris, directors, AV Trinity

For the AV Trinity service, clients can expect to pay no initial fee while the two parties establish whether the working partnership would be suitable. At that point, there is a lot of research to do, such as collating data for a defined benefit (DB) pension transfer, for example. The team will then agree a fixed fee for an initial report.

‘We work out the fixed fee based on risk and the number of hours it is going to take, in admin and adviser time,’ says compliance and operations director Cliff Patterson.

Director Louise Morris says the fixed fee for the initial report is discounted and acts as a hedge against the client not proceeding. If they decide not to, that fee is chargeable. If they do go ahead, that fixed fee is factored into the percentage fee. She says it is very rare for it to get to the report stage, only for the client to say, ‘thanks but no thanks’.

The ongoing fee is between 0.5% and 3% and depends on how much work the client requires. Patterson says they would never have a blind percentage model, which could lead to someone being charged 3% on a high-value DB transfer.

Since AV Trinity implemented a system for calculating profit and loss on each client into the back office, the directors say they are able to ensure clients are more accurately located into the correct service level, and are paying the right fees.

‘On our back-office system we log our hours spent on each client, so we can work out profit and loss for each client. We can say if they are paying too much or not paying enough,’ says Patterson.

He says it is important to ensure clients with more assets are not overpaying.

‘We have conversations with clients where, if they have substantial funds under management, we subsequently reduce ongoing fees because we have to justify what we are doing,’ Patterson says.

Ben Cordiner, director, The Financial Advice Company

Ben Cordiner, director of Leeds-based the Financial Advice Company (TFAC), says Brett Davidson helped TFAC realise it was not charging enough for the amount of work involved, so it created a new charging structure in 2014. TFAC now charges £1,500 for an initial plan, plus 1% ongoing charges, or priced individually for portfolios above £1 million. It charges a tiered fee for implementation: 3% for £1 to £100,000; 2% on the next £100,000; and 1% for anything above that.

For the ongoing fee, clients receive at least one annual planning meeting, unlimited access to their financial planner via phone, email and Skype, access to their personal finance portal via app and website, a monthly newsletter, bimonthly magazine, and Budget updates.

Chris Holmes, director, Almus Wealth Management

A number of London-based Almus’ clients are serviced on a ‘guardian’ basis, which means they are referred to the firm from a legal or accounting practice, mostly for one-off pieces of work.

Although director Chris Holmes cannot rely on these clients for a recurring income, he is happy with the model.

‘We offer two services,’ he says. ‘One is wealth management, I charge 0.5% on that, and one is a guardian one where we do a bit of work and then hand them back to the introducer because we have done the regulated bit [the lawyer or accountant] could not do. We charge on an hourly basis for these clients.’

‘My hourly rate is £225. I use these rates to calculate the scope of work and likely time to complete the work for the client, which is presented as a fee budget,’ he said.

The 0.5% fee applies to all clients, with wealthier clients invited to discuss a discount based on the type of service they want.

Holmes does not segment clients any further than that because he does not feel comfortable with cross-subsidisation.

For new clients Almus offers one or two free sessions at the outset to see if the working partnership is suitable, followed by a fee budget for initial advice, which is referenced to time costs.

‘It is done that way because, although advice is ongoing, the bulk of the work is at the outset,’ says Holmes.

From that point onwards, Almus will do client reviews at least once a year but often much more regularly.

Phillip Owen and Anthony O’Connor, directors, RPG Wealth

Phillip Owen and Anthony O’Connor run Manchester-based RPG Wealth together.

RPG has a bespoke charging structure for clients, which is by and large time-based. The firm applies an hourly rate of £250 per hour for the work of a director, £75 per hour for a paraplanner and £35 per hour for an administrator. However, clients are offered flexibility around the way they pay, with some opting to agree a retainer. Those who require less contact or fewer reviews can save money too.

Time-costing advice means the firm can easily separate financial planning fees from charges that relate to investment management, which helps clearly break down costs for clients.

Russell Davidson, managing director, Davidson Asset Management

For private clients Glasgow-based Davidson Asset Management (DAM) charges initial fees starting at 3% for clients investing or transferring up to £50,000. A rate of 2.5% is charged on the next £50,000, and 2% on the next £100,000. From this point, 1.5% is charged on all further assets. DAM’s ongoing fees are 0.5%. There is a minimum fee of £500 for implementation, and a minimum annual ongoing fee of £500.

DAM is able to offer its services at an hourly rate, with the amount relating to the member of staff handling the request. Managing director Russell Davidson charges £200 per hour, while an adviser will cost £175 per hour. Paraplanners, senior administrators and junior administrators can be called upon for hourly rates of £100, £75 and £45 respectively. DAM also offers an additional services menu, with various services available at fixed or hourly rates.

For corporate schemes, DAM charges an administration fee per member of the group personal pension scheme, and an annual flat charge for issuance of a governance report and face-to-face review. Besides this, DAM charges separately for any ad hoc work agreed outside of the standard contract terms. Charges vary depending on complexity, and are tailored to each particular scheme.

DAM arranges worksite meetings, in which they discuss pension schemes and financial issues with staff who are enrolled. For this, DAM charges £750-£950 per day, dependent on the number of days booked.

Iain Mackie, managing director, Fraser Wealth Management

Liverpool-based Fraser Wealth Management charges a 1% initial fee of a client’s investable assets, subject to a minimum of £5,000 and a maximum of £10,000.

‘We introduced the cap because we wanted to differentiate ourselves and pitch for higher end clients,’ says managing director Iain Mackie. The firm charges an ongoing fee of 0.75% with all clients receiving a minimum of one annual forward planning meeting where their cashflow model is updated.

The firm calculated it needed to earn over £2,000 a year per financial planning client for them to be profitable clients.

Phil Frapple and Chris Rigby, directors, Nexus IFA

Somerset-based Nexus IFA has an initial charge ranging from 3% ‘to virtually zero’. This is determined relative to the specific case and complexity of the client’s needs. The maximum ongoing fee for clients is 1%.

Nexus allows clients to switch to an hourly rate, which varies depending on whether the services of an adviser, paraplanner, or other member of staff are required. The hourly fee ranges from £180-£240, depending on who the client is dealing with.

Steve Balmer, managing director, David Allen Financial Services

Cumbria-based David Allen Financial Services offers the choice between two fee options. The fee structure is determined with the client during initial consultation before any chargeable work commences.

The firm’s typical charge for lump sum investments is between 1-3%, depending on the size of the investment and the work involved. The implementation and initial advice fee is 3% on the first £100,000 of a client’s investment amount, 1.5% on the next £300,000 and 1% on sums above £400,000.

Alternatively the firm calculates the amount of hours it will take to carry out a client case. Standard hourly rates are then applied at £150 per hour for financial planners and £30 per hour for administrators. This work is subject to a minimum initial fee of £450.

Raj Shah, owner, Blue Wealth Capital

Sheffield-based Blue Wealth Capital takes clients through a financial life planning process, including a cashflow forecast, at a cost of £1,500. Owner Raj Shah, as is common, offers clients an initial meeting at the firm’s expense.

‘If they decide we cannot add value to their plans, we do not charge them, though very few wouldn’t continue with us,’ he says.

However, the firm retains the right to alter the fee if work becomes more or less complicated and time-consuming. Shah says the £1,500 level is what he requires to run a profitable business in line with his own financial plan.

He charges an ongoing flat fee to increase transparency with clients and protect business income from market volatility.

‘We moved to flat fees early on as we wanted to offer total transparency and little or no conflict of interest,’ he says. ‘It also offers regular cashflow rather than cashflow that’s variable because of factors we can’t control. It allows me to plan.’

Blue Wealth clients pay a minimum retainer of £200 a month. ‘We calculated what it costs in time and resources to service the average client through adviser and admin support,’ explains Shah. Further costs are then calculated depending on the level of sophistication involved in a client’s case.

Andrew Day, director, Strategic Wealth Management

Manchester-based Depledge Strategic Wealth Management’s initial fees are fixed and calculated according to the time taken and complexity, based on hourly rates of £210 for Day and £180 for Meech.

Ongoing fees are either fixed or in tiered percentages: 0.5% up to £500,000, 0.4% for up to £1 million, 0.3% for up to £2 million and 0.25% on sums larger than that.

For the annual fee, clients receive at least one face-to-face meeting, proactive financial planning, two investment reviews, newsletters, market updates, and valuation and trading services.

To ensure profitability, director Andrew Day says he analyses figures such as time spent on each client and relies on information from back office system Intelligent Office to obtain that data quickly.

‘For a client with the average investment of £439,000, we typically spend 10 to 15 hours a year to provide that service, half of which is support staff hours. This results is a fee of around £2,200,’ he says.

‘However, a few clients with significantly higher amounts skew that average. We have a larger distribution of around 50 with significantly lower amounts but these are accumulators and require less ongoing work.’

This brings the average recurring income per client down to around £1,465. However, Day says he is happy to have such clients as they will be the £500,000 clients of the future.

Has he ever considered increasing charges? ‘It is a big service and we are competitive,’ says Day. ‘There is a downward pressure on costs in the market, and we want to offer that extra value for reasonable cost.’

David Gow and Keith Mackie, directors, Acumen Financial Planning

Edinburgh-based Acumen Financial Planning charges a 1% initial fee and a 1% ongoing fee.

The initial fee is tiered downwards above the £1 million of assets point, with the next £1 million charged at 0.75%, and the £1 million after that at 0.5%. From £3 million upwards, all funds are charged at a rate of 0.25%.

The firm has a published minimum client asset size of £100,000, and accordingly a minimum fee of £1,000. However, this is under review and Mackie is considering raising it.

For any pension transfer business, Acumen has a minimum flat fee of £1,500, which is essentially a fee for the transfer analysis.

Acumen also provides non-investment-related advice for which it charges a fee. For financial planning, advice on a protection issues or advice on divorce, Acumen will charge a project fee or an hourly charge. Hourly rates are as follows:£200 per hour for directors and pension transfer specialists, £150 per hour for financial planners, £90 for paraplanners and £75 for administration staff.

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