When a client proposed a regular retainer payment model to me in 2017, to my shame I did little to develop the idea.
However, thanks to the ongoing and increasing success of the Meaningful Money podcast, which now garners over 100,000 downloads each month, I am increasingly asked to work for clients who are not in the classic sweet-spot for advisers. They don’t have assets yet but are on the way to accumulating them. I’ve heard people in this group cohort referred to as a Henry – or a High Earner, Not Rich Yet. So let’s use Henry as a case study.
Henry approached me recently. He is the 26-year-old owner of a fast-growing Facebook ad agency. He has mastered the dark art of optimising Facebook ads and for the past two years has been selling that service to other businesses. He’s now taking on staff and is increasing his turnover and profit quickly but organically.
His accountant suggested he should start funnelling money into a pension, so Henry opened an account with Hargreaves Lansdown. That same accountant also suggested the three of us jump on a Zoom call and see what other planning needs Henry might need to address, now that business was booming.
For the next generation of clients, this model will be very attractive
Henry doesn’t yet have the £200,000 or so that most advisers might require as a minimum price of entry. And he doesn’t need me to set up a pension – he has a perfectly good plan already. What he needs is direction and coaching to help him meet his savings goals, and to make sure his financial planning stays on track in the fast-moving world of online business.
In short, Henry is prepared to pay me to think about this stuff so that he doesn’t have to. He wants me to check in with him once a quarter to start with, and to liaise with his accountant as necessary. The meetings need only be a maximum of 15 to 30 minutes and be conducted by Zoom video calls – no travelling.
For this service, I’m charging £75 a month plus VAT via GoCardless. I have waived any onboarding charge as Henry’s acting as a guinea pig while I try to build a repeatable version of this service. The way I see it, I earn £900 a year from a client with fairly simple needs, and I get to build a solid relationship while he is accumulating. Meanwhile, he thinks of this like so many other services in his life, such as Netflix, his Xero accounting package and the Adobe software he uses to create images and videos for his Facebook ads – as a subscription.
Planning for pressure
I foresee that, for the next generation of clients, this model will be very attractive. At Jacksons Wealth, we’re looking to build a version that will cost around £35 plus VAT per month, plus a small one-off onboarding fee. We don’t know yet what this will include, but we know that harnessing technology will be essential if it is to be profitable.
I wonder: what does the hive mind of UK advisers think about financial planning as a subscription service?
I’m certain the ad valorem fee model will come under increasing scrutiny from the regulator, but more importantly from clients themselves as they demand value at every point.
We’d better be ready when that happens and be prepared to offer an alternative way of working.
Pete Matthew is managing director at Jacksons Wealth Management
You can follow him on Twitter @meaningfulmoney