View more on these topics

Paul Armson: Why you should never charge for managing money

Why create a service proposition that depends on what you can’t control – the performance of money?

There has been a recurring theme in my conversations with advisers over the past few months. When I ask the simple question, “what’s your most worrying challenge right now?” I am getting the same answer: that fee discussions with clients are starting to hurt.

Just before Christmas, I heard from an adviser I have immense admiration for. Out of the blue, he asked if I would have half a day with him. “Of course,” I said. “Love to. For a fee, of course.”

John (not his real name) and his firm had been doing really well. I knew this. I’d seen his award-winning firm often mentioned in the press. But there was a problem. John’s firm was starting to lose clients to other advisers.

John was one of the first certified and chartered financial planners. In the early days, he made much of this; it became a differentiator. And it worked – at first. But it is no longer a unique selling proposition. Clients expect you to be well-qualified. It is not a benefit.

John and his firm were also one of the first to move to a passive investing approach. Again, they used this to maximum effect.

They found showing clients how they could cut down the cost of investing was another major USP. They found it easy to sell their “service”, to gather assets and, in the process, easily build in their 1 per cent per annum fee. Charging fees and still saving clients money was an easy sell. It worked – at first. But it is no longer a USP.

John and his firm are now struggling. Markets are down and they are losing clients to other advisers happy to undercut them.

Or they are having to reduce their fees themselves. They are on a slippery slope.

And they are not alone. Many others have made the same mistake and ended up  going down this dead-end route. They have created a money-focused service.

Worse, because they were desperate to find a value proposition they could hang their hat on, they got carried away with their investment philosophy. It has become the focus of their “service”.

Yes, they have done a good job in reducing investment costs for clients, but now many advisers are finding their 1 per cent a year fees are sticking out like a sore thumb. And with markets as they are, plus the Mifid II disclosures starting to bite, you can see why John, for one, is beginning to get uncomfortable.

It is understandable why this has come about. Investments have been the nucleus of most advice businesses since inception.

This money-focused realm was founded by investment manufacturers whose chief aim was to distribute their products. Over the past 20 years, the investment business has been re-engineered to include advice and planning processes, but the focus has stayed firmly on the money, for one simple reason: the sale and distribution of financial products and investments.

For years, it has been pretty easy for advisers to get away with a money-focused service proposition, particularly if clients did not fully realise how – or how much – they were paying for advice.

But many advisers are now feeling the crunch. They are starting to realise that, since RDR, they have been getting away with an investment-focused service proposition for one simple reason: because markets have been mainly going up. But for how much longer?

I have been saying this for years and I will say it again. Why create a service proposition that depends on the one thing you cannot control – the performance of the money? It is suicidal.

Aside from being unsustainable, the approach does not sound like much fun. I’ve had hundreds of advisers tell me they feel trapped. That their processes feel redundant – like watching themselves in the movie Groundhog Day, experiencing the same scenario over and over, and not being able to stop it.

Well, there is a way to stop it. But it requires you to develop a service proposition that does not depend on the sale or distribution of financial products. One where these things are just tools in your bag.

My advice is to never charge fees for the tools in your bag, for “managing money” or providing investment advice. If you do, you will always be under pressure. Price pressure and performance pressure.

And somebody – or some robo – somewhere will always promise to do that better, cheaper or faster than you can.

Many advisers have seen the good sense in taking their main focus off the money and getting it back to where it belongs: on their clients’ lives. They are creating a service proposition dedicated to helping clients get a better return on life, not just investments.

They are focused on charging fees for helping clients get the best life possible with the money they have, by helping them to make wise financial decisions.

We need to break the shackles of the industry and focus on clients’ lives more than we do their money; on the person, not their purse.

This is the only way we will ever build a trusted profession.

Paul Armson is the creator of the Inspiring Advisers Lifestyle Financial Planning Online Coaching Programme and co-founder of Life Centered Planners



Jason Butler: Why being an average advice firm just won’t cut it

One of my favourite TV programmes in the early 1990s was Troubleshooter. Years before Dragons’ Den and The Apprentice made business mainstream, the genial but wise John Harvey-Jones was shining a light on best practice at a time when the UK was experiencing a serious recession. In one episode, Harvey-Jones visited Morgan Cars in Worcestershire […]

Ian McKenna

Ian McKenna: Why UK robos look more valuable than US peers

With Asia’s emerging middle class providing huge growth opportunities, firms based in countries part of the ‘global sandbox’ appear very attractive The recent announcement that Goldman Sachs has become a strategic investor in Nutmeg and that the funds will be used to facilitate the digital wealth manager’s international expansion has fascinating connotations. The £45m deal […]

Quilter Investors launches multi-asset income range with Janus manager hire

Quilter Investors has hired Janus Henderson fund manager Helen Bradshaw to spearhead the launch of a new multi-asset income range. The range will be launched later this year by Quilter Investors – the asset management arm of Quilter, formally known as Old Mutual Wealth – with an initial two risk-targeted multi-asset portfolios expected in the summer. […]

Recording sickness absence cover - thumbnail

White paper — recording sickness absence

The latest figures from the Department for Work and Pensions illustrate that sickness absence is still a major cost to businesses, with an annual bill for sick pay and associated costs to employers of £9bn. This paper from Jelf Employee Benefits looks at the importance of recording sickness absence for any employee health strategy and how this can be carried out in an efficient manner to reduce absence, improve employee engagement and drive up profits.


News and expert analysis straight to your inbox

Sign up


There are 7 comments at the moment, we would love to hear your opinion too.

  1. Excellent article Paul!

  2. I should add that, a service proposition centred on the client (as opposed to their investments) does not make us immune from challenges about our charges. It is vitally important to be able to articulate where we are adding value and to be able to do so immediately when asked – ‘I’ll get back to you’, is not particularly convincing.

    Also, remember that there is no cost-free option available, we only need to justify the difference between what we are charging and what someone else might charge to provide the same service. In the end the client might be quibbling over just say, 0.25% per annum. A clear explanation of where we, as life centred planners, are providing additional value should be enough to overcome this.

  3. This approach may all very well for snowflakes who like to have their hand held. However in all my time advising my clients I have found that they were all perfectly in control of their own lives and knew what they were about. They wanted someone to take the drudgery out of managing their money.

    Sure you will have problems charging 1% (will Vat be in addition?) Fees should be scaled according to portfolio size – 1% for under £100k and falling to 0.25% as a minimum. Hard luck if you have to charge VAT in addition.

    Why not look at costs first and processes within the firm? Do you have paraplanners as well as adviser? Do your advisers not construct portfolios? If not, they are just salespeople and the paraplanners do the work. Where are you located? Do you own the premises or pay rent? How plush are your offices. Do you employ a receptionist? What IT tools do you use and how much do they cost? Do you rent these or own them outright? For those that you rent could you manage by using Microsoft XL instead? Do you visit your clients (and rush around in posh cars) or do they come to your office? And so on. I would be very surprised that if on a thorough review of costs you couldn’t find some substantial savings. Lower overheads allow more competitive charging. (Or am I teaching my Granny to suck eggs? But Mr. Armson seems to have overlooked the cost element)

    Passives! No wonder there are problems in a falling market. Passives in a falling market is like diving off the top board without trunks on. The role of actives is not just to try and outperform the indices in rising markets, but to lose less in falling ones.

    Finally if you want to differentiate yourself ensure you have ‘skin in the game’. In other words you invest personally in those funds and products you have recommended to your clients. Then you have aligned interests.

    All this ‘touchy feely’ stuff may play to some, but in my own experience people are more hard headed.

    • In my experience Harry you’re either a people person in the money game or a money person whom just happens to deal with people. Client’s lives and stories tell us everything and the money tells us next to nothing.
      It’s nil to with passives, actives, and those in the middle like DFA funds.
      Most professional advice businesses work to a gross margin of 30% but many of the top financial planning firms charging sub 1%pa for a full service and proper planning job can still bring the whole shabang in at sub 1% per annum (wrap/fund fees/DFM/adviser aka planner fees)…are through 60%+ without operating out of a caravan with inferior support teams and tech.
      In the end it is the client decides what and whom they value. Phew!
      When they get their new cost breakdown and see they paying 3% to 4% a year for (e.g. £80k a year of £2 million)to grossly underperform the market and not be heard nor understood, our door is open!

      • I must have been in error for the whole of my financial services career. Financial services means money I have always thought. That’s the business we are in. For me money tells me everything I need to know to do what I have always hoped was a good job. If I wanted to be a ‘people person’ I would have become a social worker.

  4. John Hutton-Attenborough 12th February 2019 at 2:09 pm

    Is this not just a marketing article?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm