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Carl Lamb: Advisers need to charge fees that keep them afloat

Carl Lamb

I am always saddened by the apparent wish to knock advice firms for trying to deliver profits as well as excellent standards. Most of us are just trying to make an honest buck.

The recent report from the Personal Finance Society highlights adviser firms are worried about the future because of the cost of running a business.

A staggering 75 per cent quoted the cost of regulation and compliance as the greatest threat.

We spend thousands on advice monitoring, back-office systems and staff to ensure every box is ticked and every client recommendation can be justified if challenged.

Do not misunderstand me; I firmly believe in raising standards and doing things right. I want my clients protected and my team to deliver excellence.

However, pushing my advisers to achieve individual chartered status is a cost to the business, so it is right for us to charge fees relative to the standard of service and advice clients receive.

Our back-office teams are highly qualified too. This represents a huge investment in our people. Our fees have to cover that investment or we will not prevail.

Reasoning with the regulator

My real worry is that the FCA just does not get it. It appears to want us to justify every penny we earn from a specific transaction or advice point, rather than looking at the wider cost of running a firm and providing a comprehensive advice service.

It is like basing the cost of a tin of beans on the cost of the can, the beans and the sauce, without considering the factory, the transport and the marketing – not to mention the product development, quality control and management of the business.

I sometimes wonder if those who criticise our charging levels really understand how the advice process works. Some have questioned why we charge a review fee when a discretionary fund manager is managing clients’ portfolios.

Is it not obvious? We review the client’s circumstances, risk profile and objectives to make sure the remit we have given the DFM is still suitable. We carry out the due diligence to make sure the DFM is still best of breed.

Importantly, we provide advice: we have a dialogue with the client that explores every aspect of their financial wellbeing and ensures their financial plan is on track. We look after the client; the DFM is simply there to look after the money.

There are those who advocate some kind of price comparison facility for advice. My feeling is this would be difficult to deliver. Firms are different, and advisers are different.

“I sometimes wonder if those who criticise our charging levels really understand how the advice process works.”

People buy people

Not unlike that tin of beans, you may well get a better product by paying more and it would be hard to pin down the quality issues to simple factors, such as how qualified the adviser is and how much time they will commit to the client meeting.

All the infrastructure and processes that underpin the firm need to be taken into account.

In the end, it is more about the client relationship than the elements that make up the advice package.

People buy people in our industry (thank goodness) and most clients are content to pay the fee we propose to them. It is about trust and continuity.

If we are to continue to provide high quality advice using empathetic, knowledgeable advisers and support staff, then we need to charge a fee that allows us to run a firm that maintains those standards and retains those people.

Carl Lamb is managing director of Almary Green



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The FCA’s asset management market study published in November will, in time, be considered a seminal moment in changing the shape of remuneration for all concerned in this sector. Those who have commented on the paper to date have focused mainly on the impact on fund management companies, giving insufficient attention to issues regarding advisers. […]

The fifteen-year itch

By Neil Jones Technical support manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. The treatment of non-UK domiciles that are resident in […]


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Carl, this is a great article and so true. There are many firms who are struggling cash flow wise who are some of the best in the industry. We’ve been great the last 18 months but have had some tight occasions trying to bring in the best staff and key personnel to deliver a high service offering.
    The regulators need to do a thematic review on this as it could break a much improved industry.

  2. Very good points Carl, I’m glad to say that I work for a company where there is no stigma attached to charging and appropriate fee, or explaining why we charge what we charge. Everyone here understands that it’s about a lot of things and that making a decent profit is one of those things.

    It’s something that has always puzzled me, why so many people in this industry under value themselves, or forget about the costs of all the support systems and teams they have in place, then struggle to explain fee’s to clients, whose perception is that it’s their adviser alone looking after them.

  3. Carl,
    I like your comments.
    However, I am sorry to have to tell you that you are wasting your time if you think that any of the staff in the FCA know much about how to run a professional and profitable IFA firm.
    They get their salaries, their benefits are paid, and they take no risks of any kind whatsoever. None of them are ever likely to have owned or run a succesful IFA firm, and even fewer will have studied and passed the advanced PFS exams.
    The FCA simply do not understand how long it takes just to get to know a prospective new client. Nor do they have they any real appreciation of the complexity, or the time and costs involved in ‘discovering’ exactly what financial assets, liabilities, and other ‘know your client’ requirements the client actually has. This is particularly true of pension funds, where The Ordinary Man (TOM), probably has > 4 different pension plans accumulated over time from previous and current employments, made up from: Contracting Out, Multiple State Benefits, Personal Pensions, S226s, S32s, Stakeholder Plans, not to mention an array of ‘Safeguarded Benefits’, including GARs, DB deferred benefits and various GPPs and other Occupational Pension Plans that may well pre-exist. And we still see clients with latent and unknown (by them), with entitlements to Enhanced Tax Free cash certification and knowing nothing about the effect that can have on the PCLS.
    The point here is that hardly any new clients know even vaguely, let alone exactly, what they already have, and the adviser has to contact the client’s previous and current pension administratotors to secure the written facts and and current/projected values at various future NRDs and extract the RIYs and fund manager costs as part of the foreensic examination processes.
    And all of that has to happen long before the adviser can even begin to think about completing a Fact Find document, and preparing advice, let alone begin to consider calculating and compliantly discosing the likely cost of it.
    This reality makes a mockery of the FCA’s current fascination with so called ‘shopping around’, and ‘cost comparisons’, simply because TOM hasn’t got a clue what he is actually shopping for!
    ‘Infomation Mining’ is a massive upfront and very time-consuming cost that has to be absorbed by every adviser who is doing a proper job, with little or no prospect of securing a meaningful fee for that work.
    I would estimate that more than 50% of the adviser’s work, and that of the IFA firm’s administration, including Para Planners, is taken up by assembling relevant and acurate data into an FCA rules compliant and current ‘Fact Find’.
    And all of that onerous, but essential work has to be paid for, and is in addition to the costs of compliance, various FCA and FSCS levies, PI Insurance premiums, office costs, admin support, CPD research and advice/personal recommendation/suitability report writing, and all of this even before the adivice is actuall delivered to the client in a massive report that is irrelevant, but compliant!
    And that is all happening before anything is implimented!

    • Great comments about shopping around. I suspect the FCA are about to have a bee in their bonnet about shopping around but how can it possibly be done? You’d have to convince clients that they should go and spend 1 to 2 hours with 3 or 4 advisers in order to compare fees. Each advisers needs to be given a fair chance to see what advice is required. Clients will not do it simple as.

  4. Some great points Carl.
    A further example if I may. Myself and the other adviser (chartered) have just spent 3 days reviewing our model portfolios. Using asset allocation tools and FE Analytics which also arent free.
    Who do I bill for that? Answer – everyone. As everyone will benefit. Can it be tied to a product or specific piece of advice – course it cant.
    This is also an argument against hourly rates. You either charge a crazy high rate for the actual time, or you tag on this sort of work to someone particulars bill.
    Mind you, if you’re a solicitor, you do both!

  5. If the likes of Legal and General along with the majority of banks and building societies can’t make investment and pensions advice work profitably because of regulation costs goes to highlight how efficient smaller IFA’s are.
    The FSA/FCA costs have gone from £200000000 to over £100000000 of OUR pounds each YEAR!!
    Not surprising firms are feeling the pinch

  6. This is a thought provoking article and leads me to the question of what is quality in the context of financial advice? I am sure that if I went to every financial planning business in the country and asked them what they offer to their clients. They would tell me that they offer a high quality financial planning service. However, how do I tell the difference between those who genuinely offer a high quality financial planning service and those who are simply blowing their own trumpet with no actual basis in fact for their claims?

    Does high quality financial planning mean the power of cosmetics and positioning a business in the marketplace. Such as the St James’s Place type of business model which focuses on attracting high net worth clients on the basis of quality marketing material, plush offices and telling people that they are the best of breed (whatever that means). Is it based on the six step approach advocated by the Certified Financial Planner certification, or does it take some other format?

    I don’t know the answers to the questions I have raised but it is food for thought. Ultimately if your clients are happy with what you are offering, you are competent, honest and the charges you make for providing the service are reasonable then there should be no problem.

  7. Great article and so true.

    We are talking to our clients about increasing our fees all the time. I don’t want increase our 0.5% model as I know it is less than the majority charge and we can do the job on that basis – but only just.

    When I mention it, clients just shrug and don’t seem to care – in fact some ask if they are still a viable client for us. They read the sunday papers they are getting the message.

    Sadly the FCA and some other commentators are not. Being an IFA is an expensive business. We are turning clients away each week or sending them to pensionwise (where appricable) and we are a one man RI business. Multiply that across the industry. There is a huge and growing advice gap.

    Basic economics of demand and supply will tell you cost is not the issue. Supply of quality face to face advice is a problem.

  8. Really interesting to contrast this article with one published on the 16th February 2017, i.e. ‘Living the high life: What’s behind the rise in adviser pay?’ It provides facts and figures about how much adviser pay has risen over the past few years!!! So, given the FACTS about rising adviser pay its quite hard to understand why there is any issue with advisers not being able to charge fees that ‘keep them afloat’! The reality seems to be that most are floating very nicely indeed at the present.

  9. So glad to see this in print

    Advisers should stop “charging in reverse” and trying to substantiate fees – the word substantiate annoys me intensely

    I had a discussion with someone recently who said “It sounds like advisers are simply charging fees based on the need to cover their costs and make a profit”. Well, as simplistic as that sounds that’s exactly what it means to be in business! You would do exactly the same if you made cardboard boxes.

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