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Revealed: 1825 firm still charging 4% upfront fees

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An advice firm bought by Standard Life’s restricted national 1825 is still charging upfront fees of up to 4 per cent, according to a client service agreement seen by Money Marketing.

For clients on Cheshire-based Jones Sheridan’s standard service level, initial charges are 4 per cent, with a typical ongoing rate of 1 per cent.

Upfront rates drop to 1.5 per cent, with typical ongoing rates of 0.75 per cent for premier wealth management clients, but these must generate at least £2,000 in income for the firm.

Additional fees for services such as pension transfer advice (£500), annuity recommendations (£500) and regular premium business (4.5 per cent) are also levied.

The client service agreement reads: “Certain aspects of our work are subject to a minimum fee which will become chargeable at the point we provide a suitability report. We will offset this charge against any income we receive from the product provider after a policy has been set up.”

According to FCA data, the average advice firm charges between 1 per cent and 3 per cent for initial advice depending on client size, and between 0.5 per cent and 1 per cent for ongoing service.

From Sheridan to Standard Life

1825 completed its acquisition of Jones Sheridan in November, having first announced the deal to purchase the seven adviser, four paraplanner firm in July.

Jones Sheridan said it would move from independent to restricted status and rebrand “in time”.

An 1825 spokeswoman says that firms acquired by 1825 do not “immediately” move onto the 1825 brand and proposition.

She says: “During the transition period Jones Sheridan is still trading as Jones Sheridan and not yet using the 1825 brand, proposition or charging structure.”

Judging by 1825’s charging information, most initial fees will be lower than under the Jones Sheridan brand. Initial fees for 1825 can be as low as 0.14 per cent, but can increase to around 4.45 per cent from comprehensive, in-depth and tax-efficient financial planning on lower-value portfolios.

Ongoing fees may increase, however, as 1825 fees can be as high as 1.19 per cent. Ongoing charges under 1825 lowest cost plan appear to be 0.79 per cent.

According to 1825 chief executive Steve Murray, a client invested in an 1825 portfolio would typically pay a total of 1.84 per cent annually; 0.75 per cent for the investment and discretionary fund management service, 0.3 per cent for the wrap platform and 0.79 per cent for the ongoing advice service.

Jones Sheridan had not responded to a request for comment at the time this article was first published. The firm has since clarified that under a more recent client agreement, the maximum initial fees clients could be charge are 3.8 per cent which applies to investments of £25,000.

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Comments

There are 23 comments at the moment, we would love to hear your opinion too.

  1. Its good to see the cost savings of a Restricted proposition being passed onto the client

  2. Stuart Rathbone 3rd January 2017 at 2:42 pm

    So what, all those empowered savvy customers who shop around courtesy of the info now readily available by F pack mandate will surly know the comparative price of what they are buying, and should they then pay it ipso facto they are satisfied it is good value.

  3. Coor blimey! An extracted value proposition.

  4. Oh boy! Small advisers should keeps this handy. If they can’t knock spots off this then they shouldn’t be in business. Presumably these sharks take it from the restricted product and therefore don’t charge VAT. But if they do charge a ‘real’ fee the presumably they are even more expensive.

    I used to keep a schedule of SJP charges handy and enclose these with my initial client proposition – just to underline how very reasonable my charges were. This sort of thing should be manna from heaven for the small advisers. If they can find out which people are clients they could even mailshot!

  5. PS And not even independent!!!!

  6. Obviously, still a very transaction- rather than advice-based model (unless, of course, they charge a pre-sale advice fee as well).

  7. They can charge whatever the client is willing to pay, or is daft enough not to question it. I once told someone at the FSA that 25% might be reasonable in certain circumstances, she blew a fuse!

  8. I’ve never understood all of this bluster around restricted vs independent.

    I’ve worked at both restricted and independent firms and there is very little difference! Independent firms are able to use products/providers from the whole of the market but in reality will use the same 2/3 in advice each area. Restricted firms create a restricted panel of maybe 2/3 products/providers in advice each area which has been filtered down from the whole of the market.

  9. There is a difference between restricted advisers who have distribution agreements with certain providers often with enhanced remuneration, and IFA’s selecting the same 2 or 3 providers because in 99% of the time the product meets the clients needs.

    A perfectly good example of this is SJP, where their partners are offered higher commission amounts for recommending WPA over many other medical insurance providers. Whilst we are still on the subject of SJP they still charge more than 4% up front fees. When I was considering setting up my own advisory practice I looked at SJP’s proposition, quite frankly I couldn’t look a client in the eye and justify a 4.5 % up front fee.

  10. As long as the charging is clear and transparent then good luck to them. If others want to compete based on lower prices then good on them too. And why is this a restricted V IFA debate – Jones Sheridan are still charging as an IFA.

  11. Perhaps Justin Cash and the rest of you should do your homework as I just have and go pay a visit to the firms homepage where you can freely download the latest agreement. It looks nothing like the one above and has considerably lower charges. Very poor journalism imo.

    • Aware of that agreement. It’s not personalised, but if you look at the initial fees section, charges could easily add up to 4% or more given the 1% for top ups, 1% for risk premiums, all the hourly fees and the complex work fees by agreement. Ongoing charges appear as quoted from personalised agreement in story.

  12. Your point is? Not that many years ago the up front fees were 7%, if you are advising on an estate of £3 million and you take 3 or 4 % on say £1 million invested, but you have given trust and will advice on the whole £3 million, then its probably good value for money.
    You have all gone along with the FCAs view that low charges are good value for money, we know that’s not true, if they regulated the product and not the advice things would be different.
    I think IFAs are a dying breed your all to small minded and happy to go along with muck your noses are shoved into. get organised and fight back.

    • John, I do not know what planet you are on and I speak as someone who has always cared about his clients but how is £40,000 as an initial fee justifiable on a £1m portfolio. Even with an hourly rate of £200 per hour that works out to 200 hours or 4 weeks work for most IFA’s. Are you suggesting that the average Advisor spends 200 hours in the first year advising/servicing each and every wealthy client he/she has?

  13. 4% is not expensive when its 4% of not very much. Looking at their ongoing tariff, the 4% initial applies to clients with a pot of £75k or below. If the average pot size from this segment was £40k, the resulting average £1,600 would not really meet the cost of meetings, fact finding, research, compiling bespoke suitability reports, administration to implement, direct costs of PI cover and FSCS liabilities and the risk premium of operating in the FCA/FOS regime.

    Looking at past profiles of this firm, it was reported at the end of 2015 as having clients with an average portfolio size of £114k (pre retirement) and £148k (in retirement). Its not therefore particularly difficult to spot that their average clients will pay something like 2.5% initial, not 4% as the headline suggests.

    If instead of publishing rates of 4% for smaller pots, these guys produced a sliding fee scale that started with a minimum £1,600 charge (like many good quality financial planning practices), I doubt anyone would bat an eyelid.

    I’m sorry, but please can we all stop going on about what everyone else charges. Charging these days is transparent. Clients are free to move if they don’t value the service.

  14. Why do the usual suspects in these comments feel the need to put down other financial adviser firms so readily. The market is the market. As long as the rules are being observed and the fees are transparent, there’s really no need to worry what others are charging. This might seem high to your firm, fine. But please cut the holier than thou nonsense. Advice is a broad church, do your own thing and shut up.

  15. Good luck to them. If that is what they charge then that is the end of it. As long as the client knows it, that all that all that matters. I really don’t know what all the fuss is about – we all charge what we charge and it is nobody else’s business.

  16. One again it’s about knowing the price of everything and the value of nothing.

    Can we have some detailed articles about adviser pricing that looks at the interaction between what we do for the client and what we charge so that we can put some perspective on it?

    Perhaps some coverage of what it costs to do what we do might help as well

    • NIck

      What it costs what you do very largely depends on how you are set up. For example:

      Very posh offices with deep pile carpet and a dolly receptionist. Paraplanners, Client Account Managers, Financial Advisers, personal assistants. Plush meeting rooms offering refreshments.
      A fleet of BMWs in the car park and so on.

      Set this against a firm where the advisers do their own planning, construct their own portfolios and work 65 hours plus per week, from a nice, but not flash office and who don’t swan around making house calls ( a very expensive pastime) as the clients come to them.

      I’m sure you get my drift.

  17. Charles Campbell 8th January 2017 at 12:23 am

    Theft by overcharging.

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