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Pete Matthew: Netflix-style fees for future-proofing IFAs

Matthew-Pete-2012-700.jpgWhen 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.

Subscription service

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.

Pete Matthew: Empathy is a superpower

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



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

  1. Justin Modray 9th July 2019 at 2:43 pm

    Interesting stuff Pete. How does this work from a regulatory point of view? Are you giving Henry some form of ‘guidance’ rather than regulated advice? Or do you provide investment advice on his HL SIPP for example?

    It’s a nice idea, I’m just grappling with the practicalities of providing this style of service as a regulated adviser.

  2. This is an interesting idea and has some merit. The only issue I can see is that if Henry is treating this as a Netflix style subscription, does that mean that at some point he is going to want to ‘box set binge’ on his advice as he has paid for this over the years at some point?

    The big difference between things like Netflix and a Xero accounting package is that the same amount of ‘human’ interaction is made from the supplier whether the client is using it everyday or once a month for exactly the same fee. But if Henry or a bunch of Henry subscribers all want quite a lot of work at the same time, that is a lot of human interaction for the same fee.

    Equally, when you start giving full regulated advice do you stop charging VAT? Which means Henry’s fees are going down (from his point of view) and then when you go back to non regulated are his fees going back up due to the VAT?

    I’m not sure it is a regulatory issue, but I can see potential issues with clients getting perceived value for money. And what do you do about Geff (get everything for free)? Who will most certainly be making sure he gets his moneys worth, what do you do when his monthly subscription is losing you money? Or he hasn’t had anything for a year and then wants his whole porfolio looked at in the next 2 weeks?

    It will work for some but others will definitely be more work than they are worth.

  3. @MW – Perceived value for money?

    Clients don’t have to have assets managed by you to get value?

    I think this is the way forward, I think over time we will see advisers simply giving advice and giving the client the option to implement themselves or do it for them.

    Some will give advice and not get involved in the implementation at all.

    All change in the advice sector and for the better in my opinion.

    • We did something similar from about 2010 until 2015 ish. Worked quite nicely and r likely to do the same with younger advisers working with younger clients

    • When I say perceivbed value for money, I mean one person will agree that paying a monthly subscription will give them exactly what they need at the price they think is acceptable and others will want more. It’s the age old arguement of advisers fees, some see the value others unfortunately dont.

      I can see it working and am not poo pooing the idea. But you will have some clients who will want a lot of attention and hand holding and will make sure they get their ‘value for money’ and others will not. i.e some clients will be more profitable than others as they will require less interaction.

      It probably will be more attractive to the younger generation as let’s face it no one likes change and they will look at this from a different angle and see the up sides rather than just the downs.

      Good luck to anyone that goes down this route, maybe one day it will become the norm.

  4. Note that it is a VATable service. 20% on top of existing fees for clients!

    • Yes. But who provides the service if it is more financial (unregulated) coaching than financial (regulated) advice then becomes the issue to consider.

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