Let's talk about cost.....

In the second blog responding to “This is Money" I want to talk about cost and paying for advice.

Let’s talk about cost

I recently attended a presentation that said that presentation is key. Journalists seem trapped around the idea that fees will be an hourly rate. I have mentioned this many times in previous blogs and clearly fees can be an hourly rate, a percentage of assets managed, a retainer fee or a combination of some or all of these.

We charge a percentage of assets managed and this varies but can be between 0.5% and 1.0% p.a. However, we don’t tend to charge for any up front work so everything is packaged into the annual fee.

I was looking at the fees mentioned by Gina Miller. She implied the fees could be 1 to 2% to the adviser (I have not seen one adviser charging 2%) and 1 – 2% hidden costs. This is shocking when you take the high figures because the annual charge is 4% p.a.

In reality these figures are scare mongering. I recently looked at a like for like portfolio against a direct proposition and assuming these hidden fees the direct platform charged around 1.67% p.a. after rebates back to the client. A similar advised portfolio with a fee of 0.75% came in at 1.87%. This included all the rebates back to the client and these so called hidden costs. In reality a fee of 0.75% was costing the client 0.20%.

Let’s talk about paying for the advice

So let’s talk about paying for advice, again it’s about presentation. We can argue whether an hourly rate is fair or a percentage until the cows come home and we will no doubt never agree but let’s talk about paying for advice.

Our clients have paid a percentage for advice for a number of years, RDR made no difference to this and we have had no queries or questions around this. Likewise I know practices who charge a monetary amount and again they have had no problems with this.

It is about how you package your proposition and what you do for it as to whether the advice is perceived as worth the cost.