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Neil Liversidge: Advisers are about making a living, not a killing

Neil Liversidge

The facilitation of ongoing advice fees is back in the news. The usual pundits say facilitation results in higher charges, a lack of transparency and the overcharging of clients with larger portfolios. I cannot rule that out but in my experience wealthier individuals tend not to be fools.

Firms charging the same percentages for £5m, £1.5m and £150,000 will sooner or later lose clients to firms like ours.

So let’s talk about charges. In June 2015, I chaired the Leeds round of Money Marketing’s Retirement Planning Invitational, where charges were much discussed.

I mapped out what we charge but not one member of the audience would take up my invitation to do likewise.

For investment and pension business, we normally charge a £695 basic advice fee and a 1 per cent implementation fee. Our standard ongoing charges are 1 per cent per annum for non-pension and 0.5 per cent pa for pension portfolios.

Why the difference? It is a commercial decision based on experience. For one thing, there tends to be more ongoing maintenance with non-pension business such “bed and Isa” arrangements, and the pension pots we run tend to be larger.  Where we can afford to pare fees down, we do.

Normally our fees are all-inclusive. We do not charge for “bed and Isa” work or for cross-funding between pensions and Isas, for example. If a client wants to come out of drawdown and move into an annuity we do that free of charge, even though it means saying goodbye to the ongoing fee.  We want clients to make the retirement income decision right for them without a cost deterrent.

For larger investments we may reduce our annual fees depending on what the client wants and expects. Often we throw in things such as children’s stakeholder pensions and Junior Isas arranged free of charge where parents are investing significant sums.

Our basic principle is one initial fee on one tranche of money once, no matter how large it grows, and we give a specific no-churn guarantee trademarked as “FairFees”. Unsurprisingly it is very popular. Every compliance consultant we have ever had has told us we under-charge.  But our clients make money and we all get to sleep at night. We make a living, not a killing, and that suits us fine.

Offering clean, transparent and great value charging means we have complete confidence in our proposition. It follows, therefore, that any reductions are given at our sole initiative. If we can afford to take less, we do, without being asked.

“Our basic principle is one initial fee on one tranche of money once, no matter how large it grows.”

Real world charging

But anyone pushing for more will not get it – and if they persist we will not take them on. The meanest tight-wads are always the worst clients to deal with and, in any case, I have an inbuilt dislike of the sharp-elbowed types who think they can bully their way to a better deal.

Returning to facilitation, hopefully the regulators and politicians are smart enough to understand that, in reality, it is about efficiency, credit control and cost-containment. Keeping charges down, not up.

If the pundits who pontificate actually ran businesses with overheads, employees and clients, they would know that, of course.

Neil Liversidge is managing director of West Riding Personal Financial Solutions

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Comments

There are 9 comments at the moment, we would lover to hear your opinion too.

  1. Neil

    Your headline is spot on. It rather encapsulates the ethos of most IFAs.

    Elsewhere on this site there is a lot of posts concerning SJP. It is a pity the pundits don’t direct their pontifications in that direction, before haranguing the IFA community. In fairness the Times has now moved their spotlight from us to SJP and highlighted the Arnold Rosen case which makes the charges levied by the great majority of IFAs look fantastic value.

  2. As ever, Neil is the epitome of the ever professional adviser, and if we had more just like him, the IFA profession would be held in much higher regard by consumers and the regulators.

  3. So a non pension client investing £100k for 10 years with Neil would pay more than with SJP.

    1.7% initial plus 10 yrs of 1% is more than 5% initial and 10 yrs of 0.50%
    (and that’s assuming they pay the full 5% with SJP which, in truth, many of their clients don’t)

    I acknowledge the value of independence over restricted but the hammering SJP get from IFA’s over charges is bizarre. Their TERs are lower than vast swathes of adviser marketplace and the 5% initial is a maximum. They can and frequently do discount from that.

  4. My approach is very similar to Neil’s. You charge once for initial advice on money and ongoing fees for maintaining the portfolio. Moving the same money from one location to another as a general rule should be met within the maintenance fee.

  5. Yet another article where someone gets to tell us all about their amazing fee model in a patronising manner.

    Its all feels very defensive.

  6. Neil F Liversidge 20th February 2017 at 11:03 am

    @DBN For our charges, which are wholly transparent, our clients get full service and ongoing independent advice and we get no backhanders of any kind from anyone. As has been revealed, SJP advisers get overrides for selling SJP products and their less-than-obvious ongoing fees seem to be paid merely for the ongoing pat-and-stroke exercise designed to keep their clients invested with SJP.

  7. Neil F Liversidge 20th February 2017 at 11:18 am

    @Matthew 10.21AM: I’ve never been ‘defensive’ in my life as anyone who knows me will surely tell you, quite the opposite if anything! I just believe in free, candid and open debate with my fellow professionals. When it comes to my clients, I similarly believe in telling them exactly what we can do and what we can’t do, and what we charge for what we do. In furtherance of open debate, when I blog I do so using my own full name and not a pseudonym. When others ask what we charge, as they did in the MM forum to which I referred, I have no hesitation about telling them. Advisers are often accused on obfuscating their charges. Nobody can accuse us of that. Now you Matthew are free to tell us your own name and what you charge. Why don’t you? You can add to the debate and encourage others to do likewise. That has to be a good thing. Thank you for your contribution. (That’s not meant to sound patronising by the way!)

  8. Why are some contributors always concerned about pointing out “bad things” about any other advisers charges? It is of no concern of mine what or how Neil Charges because the way he charges fess works for him and also for his clients. That is all that matters. Regardless of whether or not he charges more than me ( or SJP – only because it was mentioned above) is totally irrelevant (or should be) to anyone else. He is obviously being successful in what he is doing and I think we should all be commending anyone who has a good-news story, not slating them. We all have our own businesses to run and we all run them in the way that works for us so who are we to criticise others if they do it a different (or more/less expensive) way to our way of thinking.

  9. @Marty Y hear hear!

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