Why do we charge fees?
We have only had a few queries over the last 10 years or so from clients who have asked why we insist on charging them a fee. This led us all to talk about why we are certain that we add far more value than we charge our clients. We decided to make a list of the matters that we concern ourselves with BEFORE we ever speak to a client. Some of these are itemised below.
Expertise & Experience
The most easily recognised sign of expertise is the level of qualifications that our team holds.
- Our Financial Advisers have always been and will always be qualified to a much higher level than the minimum required by the Financial Services Authority (FSA).
- To further emphasise our expertise, we are particularly pleased to be recognised as one of an elite band of Chartered Financial Planning firms.
- As a result of our qualifications, experience and culture, we qualify to be included on the SIFA Professional Directory of IFAs, which is endorsed by the Law Society.
- Our research, client support and administration staff are also qualified to a very high level, with some having been former mortgage, equity release and financial advisers.
- We have both female and male Independent Financial Advisers, with more than 20 years combined experience of giving financial advice.
- On top of this, the members of our research and client support team have more than 40 years combined financial services experience and are highly qualified.
You will note that no other financial advice firm in Derby operates in the way that we do, has our level of qualifications, endorsements or employee resource that enable us to provide the highest level of bespoke financial planning advice to our clients.
Knowledge and passing exams is one thing, applying that knowledge and the experience of having done so over more than a decade is another.
Ongoing training, development and keeping up to date with the markets
As you are probably aware the investment scene changes constantly. In just the last 12 years we have experienced the ‘Technology Boom’ crash and then the ‘Credit Crunch’, with the UK experiencing the first ‘double dip’ recession since 1975. There have also been several well publicised investments that have ‘blown up’ and lost investors money, such as Arch Cru, Key Data and Traded Life policies.
- During the worst decade of investing in a generation (since the 1920’s) we have helped our clients to meet their financial objectives without them being unduly concerned about their monies. We are able to provide you with testimony from clients and Solicitors (some are on our website) who we run investments for both personally and within several Trusts to this effect.
- Our due diligence process has also ensured that we have steered clear of all of the ‘problem’ investments that have cost clients monies and caused a great deal of concern.
- We receive live web streams daily, keeping us up to date with exactly what is going on in the markets and with the investments our clients hold.
- One member of our team within PFC dissects the Financial Times each day, circulating key articles to everyone where relevant.
- We also receive in excess of 40 financial publications a month that again are read and the key articles circulated or discussed at our regular meetings.
- We also attend several conferences each year that are designed to keep us at the cutting edge of financial planning.
The result of all of this work means that if a change needs to be made, or if you contact us with a concern, or if we are having a review meeting with you, we can provide you with our up to date views on the markets and how your portfolio is positioned to deal with the issues ahead.
All of the aforementioned tasks take place before we speak to a single client. Our team is dedicated to being the most informed they possibly can be, so that they can apply their knowledge to your personal situation, allowing the best possible outcome to be achieved for you, as a valued client.
We have focussed above on the issues we undertake directly related to our clients, however, we also have to undertake a large amount of work to meet the constantly changing FSA requirements. Everyone regulated by the FSA has found that the cost of regulation has escalated significantly both in terms of the actual amounts levied by the FSA and also in respect of the extra staff costs incurred in meeting their requirements. We have always embraced any revised procedures as a method of improving our systems, procedures and client service proposition, rather than just as an imposition. However, this all has an impact on our baseline cost.
The Professional Way to Provide Financial Advice
When you come to address your financial planning, do you want to instruct a professional Adviser / professional organisation, or a salesperson / sales organisation?
That might sound like a silly question, however, the difference in results can be enormous. A brief comparison is provided below:
Sales organisation / adviser
- The majority of financial advice firms pre 1 January 2013 portrayed the image that advice was ‘free’, or certainly if the client decided not to take up an investment or other recommendation, they would not be charged for any work undertaken up to that point.
- Whilst for some clients, this was a cost effective method for them to access advice, for any client with a large sum of money to invest (e.g. in excess of £100,000), or complex financial planning it invariably led to a poor result for them and in some cases, they were actually cross subsidising advice for clients investing less money.
- That is a bold statement; but ask yourself, if you were providing a service to someone and you would only get paid if the client proceeded, might you try to simplify or commoditise the process of providing the service to reduce the cost to you if the client decided not to go ahead?
- Worse than the lack of a ‘real’ effort in undertaking personalised research to select the best solution for a client, in reality many clients that have received advice in this manner have found that any negative aspects of products are ‘played down’ and the positives are accentuated. Why? Because if the client does not proceed with the recommended product the Adviser will not get paid! Also, some recommended products allow large amounts of adviser charges’ (formerly commission) and these have been favoured by sales organisations. Why? Because they get paid more if they recommend them.
- In summary, a sales organisation will only charge a client if they make an investment or set up a financial product and ultimately they will enable the client to meet this charge via a deduction from the product (the deduction would formerly have been commission).
Professional adviser or organisation
- We charge on an hourly basis for our initial advice or offer clients the option of a fixed fee for our services, if they prefer this.
- As a result of the way our charges are calculated, the charges will always be commensurate to the work undertaken and amounts involved, with no client subsidising another, or being recommended a product because it allows a high level of charges.
- Our clients pay for our professional advice irrespective of whether an investment or financial product is arranged.
- We then follow our process of acting on our client’s behalf to arrange the best possible solution for them. (See our separate documents ‘Advice unique to you - Ethos and Delivery’ for further details).
- Many of our clients are acknowledged experts in their own field; we act for Doctors, Professors, Teachers and Directors from world-leading Companies such as Rolls Royce. Our role is to undertake the necessary research and provide information and advice to them, so that they are in the same position they would have been in had they chosen to be Financial Advisers themselves.
- There is a chasm of difference between the research and ‘due diligence’ that we undertake on our clients’ behalf, the questions we raise with various investment / product providers and the process followed by sales organisations, as the motivation and driving force behind the process is completely different.
- We have provided professional fee-based advice for over 10 years. Any commission that was generated belonged to the client and was used to enhance the contract terms or to offset our fees. This approach avoided any bias in product selection and the focus was on researching and selecting the right products or solutions. In one instance, we rebated in excess of £100,000 of commission to a client (after they met our fees, which were a fraction of this amount). Their former adviser intended to retain the commission!
- The fact that we have undertaken thorough research for every client and provided advice on the basis described above for over a decade means that we have built up a unique database of knowledge. We have uncovered details about investments and products that the providers did not know, had never thought of and had never been questioned about. Why? Because other firms recommending them were selling them, not undertaking due diligence and ensuring that they would be happy to invest in the product themselves!
- We have never made the same recommendations to two different clients. When we know what planning you need, the bulk of our time goes into researching the most suitable arrangements for you. We operate on the basis that you can pick any alternative strategy and we will be able to tell you why it failed our criteria. As an example, if you invested £1,000,000 into UK based Equity funds, we would expect to spend at least 10-20 hours ensuring that no suitable fund escaped our initial computer generated ‘shortlist’. We then look at the make-up of the shortlisted funds so that the Adviser is fully aware of what they are recommending and excluding. Please see our separate document entitled ‘Initial and ongoing investment process’ for further details.
- Charging you for advice from day one might not initially seem as attractive as the alternative offer, from a sales organisation, of ‘free’ advice should you not go ahead with the recommendations for any reason. However, often our clients have consulted with us for a second opinion on advice they have received from a sales organisation and our professional advice has enabled them to avoid a course of action that would have otherwise had serious wider implications for them – sometimes to the tune of several hundreds of thousands of pounds.
- Our way of providing advice is truly unique. However, before we act for anyone, we want to make sure that we will add more in value than the cost of our services otherwise there is no point in our involvement. This means that our service is not the most suitable option for everyone, typically a client needs to have more than £125,000 of investable assets, or an Estate worth more than £500,000 for us to meet our objective of adding more value than we would charge them, but if you exceed these financial guidelines, you are likely to benefit from using our services.
The real difference with the PFC proposition comes when we start to provide advice to our clients. There are many factors about our process that make us unique, four of the main ones are our independence, experience, qualifications and our holistic lifetime planning model. For further details as to why our advice is special, please see our separate documents ‘PFC – Advice Unique to you Ethos and Delivery’ for further details.
Fundamentally a client has to decide: Do they want a firm to sell them a financial product regardless of the wider implications? Or, do they want a firm to act on their behalf and provide them with professional advice to ensure their finances are arranged in the best possible way irrespective of whether a financial product needs to be arranged?
If your decision is the latter, we would love to hear from you - please contact us and you will not be disappointed.