Yesterday I disclosed my fees on LinkedIn which caused a bit of a ruckus from some other financial advisers. Some of them felt for the type of clients I wanted to serve, my advice was considered “expensive”

The majority of my clients are parents with children who are still in primary school - are under the age of 45 and are focused on building their net worth. My goal when setting up my business was to serve clients like this, who are in the same boat as me with their own unique financial challenges. In order to serve these people I settled on a fixed fee approach that I believe adds the right value for the client.

What’s the Alternative?

Traditionally, financial advice has been charged on a percentage basis, typically around a 3% charge for initial work (perhaps discounted for larger amounts) and a 1% charge for ongoing services. In this way a client with larger assets would pay more than someone who has smaller amounts to invest.

Unsurprisingly this charging schedule is geared more towards clients who have existing assets as an adviser would rath work with someone with £400,000 rather than £100,000. It would also be more for people in or approaching retirement too.

Is % Charging Bad?

Like any approach, it is all about the value that is being delivered. Someone charging 1% may add loads of value and another charging a fixed fee may be offering very little. If you are just paying someone for investment advice, whether that is a percentage or a fixed fee, the value you receive will likely be limited. Ultimately, value is determined by the payer.

I delved deeper into the thorny issues of fees in a previous blog post which you can read here.

HENRY’s

My ideal client could be described as HENRY.

H - High

E - Earners

N - Not

R - Rich

Y - Yet

Most will be yet to accrue significant assets but do have high income and the ability to regularly put money into their savings. Under a percentage approach, it is likely they will not be able to find an adviser willing to work with them because it’s not profitable. Yet they are arguably more in need of financial planning than most people.

How Financial Planning Helps

Most clients have a specific trigger that causes them to reach out, but ultimately they all want similar things.

• Peace of mind they are doing the right thing.
• Clarity over their financial position and what they need to do.
• Security in knowing their family is taken care of.
• Getting financially organised.
• Simplifying their finances.
• Taking the required actions needed to achieve their financial priorities.

Do Parents in their 30s or 40s Really Need Financial Planning?

What I call Real Financial Planning is all geared towards helping people use their money to live the best version of their lives. It is just the tool for helping them achieve their goals.

Clients in their 30s and 40s will potentially experience many of the following life events:

• Changing jobs
• Setting up a business
• Selling a business
• Having more children
• Children going to private school or university
• Paying for weddings
• Getting divorced
• Making work optional
• Buying their dream home
• Buying a holiday home
• Stopping work totally

All of these have a financial impact on their lives. Some events can be prepared for while others will have to be reacted to. A financial planner’s role is to help you navigate your path towards your ultimate destination.

Just Because You Are “Young” Doesn’t Mean Your Financial Situation is Simple

We are still young, well, in my eyes. So there may not be lots of assets (yet) but this doesn’t mean that you financial situation isn’t complex. You will likely have various financial priorities beyond just building wealth or may need help with more technical aspects of financial advice.

None of the following is “simple”:

• Extracting profits tax efficiently from your business.
• Complex tax planning such as the annual pension allowance.
• Setting up various investments for yourself and for your children.
• Having several rental properties and capital gains issues.
• Balancing living for the now with preparing for the future.
• Achieving and planning for several different financial goals.
• Knowing how much insurance you need to protect your family.

Why I Choose Fixed Fees

There are pros and cons to all approaches. A fixed fee, for example, may be more expensive for some clients but cheaper for those with more assets. Ultimately, for a client it is understanding what the fees are, what you are getting for it and what service is involved.

The reasons I opted for fixed fees are:

1. It allows me to work with clients who don’t yet have assets but need advice - Without charging fixed fees it wouldn’t be profitable for me to deliver a high-value service to clients. Yet I am passionate about helping people like me, looking to balancing living life now whilst also preparing for the future. These clients are exciting as there are so many opportunities and possibilities for them in their lives. I get to help them fulfil their dreams.
2. It means the focus is not just on their investments - For me, investment returns are only a small part of the value that a financial planner can bring. A lot of the time it is an intangible value such as clients having peace of mind or knowing that they are on the right track. Fixed fee means that I can focus on other areas such as cashflow, reducing debt or saving for a house rather than just trying to get clients to invest.
3. It can help to avoid potential conflicts of interest - Say you had £100,000 spare, if a financial planner was paid on a percentage basis it would be in their interest for you to invest that money as they would receive a bigger fee. But it may not be the right thing for you to do. Perhaps you want to use capital to buy your dream holiday or a holiday let for you and the family to enjoy. Perhaps you want to go travelling or use the money to take a sabbatical? As there is no financial gain for the adviser you can be confident any advice given is in your best interest.
4. You won’t get charged more just because you have more money - This was always a bug bear of mine - that people would pay more for the same service just because they have more money. There is, of course, an argument that more value can be added for those with more money, especially when it comes to avoiding big financial mistakes. However, for me, I want to ensure that all of my clients pay the same amount for the same service. It also means as you accrue wealth your charges won’t be increasing by stealth.
5. It’s how we pay for stuff now - Our fee is like a monthly subscription in the same way as Netflix, your phone or the gym. It’s how we like to pay for everything. If you don’t have assets you can pay from your income, or it can be deducted from any assets you do have.
6. It is geared towards a long-term relationship - Financial planning is a journey, not a one off. The one thing we know about your first plan is that it will be wrong. Your life will change and so may your priorities so it’s important your plan is regularly updated which is where ongoing planning meetings fit in. There are also times where you will need extra support and knowing that you can get in touch brings more peace of mind.

My Fees

In order to best serve my clients, I offer an ongoing service for £150 p.c.m. for a single client and £175 p.c.m. for a couple to deliver ongoing financial planning and wealth management for clients. In most cases, clients need to sort out their current financial situation such as consolidating several pensions or setting up ISAs. Therefore, I charge an initial fixed fee of £2750 for this initial work which includes implementing any recommendations.

I may not be the cheapest but I certainly know that I am not the most expensive. I strongly believe in the value that I offer and that a fixed fee is the right approach for the generation of clients I want to serve.