Why We Are Different
How We Charge
We charge flat fees for all services, even for discretionary portfolio management.
This is designed to remove the sources of consumer detriment arising from the industry’s current charging methods:
- Conflicts of interest
- Cross subsidy between people at different wealth levels
- Cross subsidy between financial planning and investment management
- Weak correlation with the actual value to the client.
- Our flat fees are set by reference to a combination of actual cost and the scope of added value. They are reviewable annually (or as the scope changes)
Though we break the traditional explicit link between fees and the market value of a defined set of assets, fees do still relate to the level of clients’ total wealth. This recognises the economic reality that scope and complexity tend to relate to wealth level. There is also overwhelming market evidence that investors choose to see the value of investment services in terms of their levels of wealth, rather than just the direct costs of delivery, but then try to game the amount of their wealth subject to fees, even if it is counter-productive in terms of service value.
By breaking the explicit link with portfolio values we can reflect these realities whilst also better aligning our interests with clients’:
- We remove the incentive to game an adviser’s fee structure by concealing information or assets and by limiting the scope
- We have no vested interest in which form of service clients select
- We are indifferent to the extent to which they retain or change their existing industry relationships
- Portfolio-based fees interfere with decisions about the mix of risky and risk free assets — decisions vital to risk control
- Transaction-based commissions bias the advice, including against all alternatives that do not involve a commission-earning transaction for the adviser (such as buying property, paying down debt)
- Don’t be fooled by the ubiquitous label ‘fee-based’: if portfolio-based fees can only be collected by offsetting commissions received, then commission bias between products is not removed – “it is only by persuading people to part with real money that an adviser can claim to be truly independent”: FT, 30 October 2006
Flat fees are better than time-based fees:
- They better reflect the way clients actually value services
- Clients can budget with more certainty and avoid surprises
- We can build future real costs into their planning (eg their drawdown targets)
We are economically independent:
- We only take a fee from our client
- We do not pay for, or take payments for, referrals
- We will negotiate the best terms with third parties
- In the unusual circumstances where unavoidable commissions would otherwise go to waste, we collect them and pay them to our client
We can access products through competitor firms without fee conflicts
We give clients complete information about our own and third-party costs.
By clicking here you can read an article, originally written for industry website Citywire, prepared by Stuart. Within the piece he describes our flat fee approach and highlights reasons why both the client and the business should value this method.
