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Towry Law responds to fee scrutiny

West Riding Personal Financial Solutions managing director Neil Liversidge has called on fee-only advocate Towry Law to justify how its fund charges differ from initial or trail commission.

It is the latest in the heated industry-wide debate on how advisers should charge for their services.

Below is the initial letter from Liversidge, plus the response from Towry Law chief executive Andrew Fisher.

Open letter to Towry Law chief executive Andrew Fisher

Dear Andrew,

As you are aware, a large number of advisers, me included, are lobbying politicians on the subject of the RDR. You were recently quoted as referring to the lobbying as ‘pathetic’ and to us as a ‘rabble’.

I am writing to invite you to either clarify those remarks or alternatively to withdraw them and publicly apologise to those like myself who feel slighted by them.

In a democracy all parties to an argument are entitled to make their views known. Civilised debate tends to be for the general good but once again, as on previous occasions, you appear to have resorted to insults and name-calling. My personal opinion is that such comments are childish, unprofessional, and certainly not befitting someone in your position as a putative leader of our industry.

However, as you appear to have set yourself up as an arbiter of what constitutes professionalism perhaps you would be willing to clarify some points that might enable me and others to judge your credibility for such a role?

My understanding is that whereas you invoice your hourly rate charges, the charges you take from your funds-of-funds are taken direct by Towry Law, so the payments are made in the same way as is commonly the case with initial or trail commission from investment houses and insurance companies.

If your model is different Andrew, and I have somehow misunderstood, please be so kind as to explain to me how. I certainly have no wish to misrepresent you in the way that you have, by implication, misrepresented me.

Secondly, I am sure you would agree that a pound paid by a client is the same cost to that client whether it is labelled a ‘fee’ or ‘commission’. Can I invite you then to look at the enclosed calculation based on what I believe to be your charges? For ease of computation they are based on nil growth. Your firm appears to be rather more expensive than mine, upwards of 60 per cent dearer in fact. Now of course, you have the right to charge what you see fit, as do I. I am somewhat surprised though that Towry Law appears to be so expensive.

That said, you doubtless have a substantial salary bill and it must take a very generous remuneration package indeed to keep happy a boss who enjoys sushi, Porsches and heli-skiing. Again if my information is wrong I shall be deeply grateful to you for any correction you can make.

Thirdly Andrew, in view of the fact that you apparently take commission from client funds under management rather than invoicing for fees, would you like to confirm how you report that income on your GABRIEL return? You see, prior to my last GABRIEL report I checked with the very helpful FSA contact centre how I should report our income and the answer was very definitely “commission”. As our model is essentially the same as yours – just much cheaper – it seems to me that you must also report your income as commission. But how does that square with your oft-made pronouncements about being fee-only?

Having asked you to clarify so many things Andrew I feel it incumbent on me to do the same: RDR as currently written would not kill me or my business, but I do think it’s a cack-handed, bureaucratic and inordinately expensive way to go about something that natural progress is achieving anyway.

I do not like the effect it will have of handing a lot of business to the banks who, as events have shown, aren’t even fit for their primary purpose let alone personal financial services, and I do not think that banks should be allowed to remunerate on performance if commission is to be effectively banned for IFAs.

Neither do I like the idea that a lot of ordinary working class people will find independent advice more expensive or completely inaccessible – something which the recent report by Ernst and Young seems to confirm.

I have been in this business 30 years. God and the regulator permitting I hope to work at least another 35 as retirement before 80 seems such a waste of time. I need 20 points more for my diploma, intend going all the way to Chartered and fund the development of my staff on the same lines. I have operated on a fees-via-offset basis for investment business since I set up my own firm and give clients a written no-churn guarantee up front.

I have never knowingly done a client a disservice in my life and I do not take kindly to those who impugn my professionalism, integrity, motives or ethics.

I will welcome your future contributions to this debate Andrew, as I am sure you have more to give, but I do hope that in future they will be more reasoned and polite than they have in the past.

Given that your remarks were delivered in a public forum, this is an open letter, to which you may respond as you see fit.

With kind regards,

Yours sincerely
Neil F Liversidge
Managing Director
West Riding Personal Financial Solutions

Dear Neil

Thank you for your letter. I apologise if you feel slighted by any of my comments, that was not the intention. What I do want to do is to stimulate discussion and look forward to the post RDR world.

My sense of the debate around the draft rules for the implementation of the RDR is that people fall into one of three camps:
1. Those that think that the current system is healthy and that it shouldn’t be changed
2. Those that think that the current system could be healthier and that it will get better over time.
3. Those that think that the current system requires radical surgery and that the FSA’s draft rules, whilst not meeting all of their wishes, is the best way forward.

We at Towry Law sit firmly in the third camp. It is not too clear where you sit but closer to position 2 than 3 I suspect. However, I am not sure why. You are nearly diploma qualified which is better than most; the FSA estimate that 75 per cent of IFAs are not. By ‘natural progress’ even our children will find it hard to find a diploma qualified adviser. Surgery is required. The natural healing progress will take too long.

Rather than debate the finer details of our firm’s FSA returns, let’s look at the key issue of fees versus commissions. I agree that all clients pay for financial advice today, but it is dressed up as a commission paid by an insurance company rather than a fee paid by a client. This is wrong.

The FSA’s draft rules ban commissions and force the industry to be explicit with clients about the cost of their services. This is a much more honest client proposition.

Given your comments, I am puzzled as to why you do not support this. Fee off set, so often held out as the best way forward, is also fundamentally flawed: remuneration is dependent upon the sale of a product rather than the provision of advice. We should have the confidence to charge for our advice clearly and explicitly.

At Towry Law we charge time based fees for independent advice and percentage of asset based fees for our discretionary independent investment management service.

Both are fees paid by Towry Law clients to Towry Law. The idea that they are a commission paid by Towry Law to Towry Law makes no sense. I have not gone through the details of your spreadsheet but I suspect that it doesn’t focus on total cost to the client, including underlying product charges (any discounts we negotiate from product providers are passed on to our clients) or the fact that we are managing the assets actively under a discretionary agreement.

Towry Law will never be the cheapest. Cheap rarely means the best, or even good. We focus on value for money. In terms of relative value, all our advisers are diploma qualified or above today, we have a dedicated team of investment professionals managing money for our clients, a team of pension experts supporting our client proposition and a business infrastructure in terms of both capital and operational process providing stability and outstanding service.

We have made our changes and are fully RDR compliant today. Our focus is on looking forward, developing our proposition and delivery great value to our growing client base.

Yours sincerely
Andrew Fisher

Highclere Financial Services partner Alan Lakey has also weighed into the debate in his Money Marketing column this week. Lakey says that charging a setup fee which exactly mirrors funds under management is the same as taking initial commission, whilst charging an annual fee which exactly mirrors the funds value is identical to taking trail commission.

What do you think? Is Andrew right to carry on his very public campaign against commission-based advice? How wide is the gap between Towry’s method of remuneration and commission-based advice? Let me know your thoughts.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Andrew Fisher’s very evasive and self-serving response to Neil Liversidge’s letter is typical of the man.

    An absolutist just like his chums at the FSA (the same FSA who have conceived the absolutely barmy idea of reading across the RDR to the protection market – that way madness lies!) his underlying agenda, whether he admits it to himself or not, is a Brave New World where companies like his, along with the wretched banks, can dominate the market to the unequivocal detriment of the consumer whose interests he and the FSA claim to have at heart.

    That said, I am wholly in favour of the impetus towards higher professional standards and transparent charging structures that the FSA has initiated through the RDR. But the key here has to be EVOLUTION, not REVOLUTION.

    Just like the First World War generals on the western front Mr Fisher and the FSA want to take the ground in front of them in the shortest possible time and at whatever the cost to others. This is “straight line” thinking of the worst kind. It must be resisted and defeated if access to independent financial advice for the majority of consumers is to be maintained and the careers and livelihoods of thousands of competent and professional (yes, professional!) IFAs are not to be trashed at the whim of the FSA.

    Meanwhile I propose Mr Liversidge should challenge Mr Fisher to come down from the bridge of what he thinks is his super-tanker and publicly debate the issues with him in front of a live audience. I know who my money would be on to prevail in such a debate.

    Roger Heath
    Financial Consultant
    Cadogan Wilson Ltd

  2. If I was a regulator I would wonder what sort of ‘profession’ engages in fisticuffs in public. It is immediately apparent (FOS ‘speak’) that there are diametrically opposed elements in the adviser sector, some are ‘born again’ and others are ‘old school’. Do any of them have evidence supporting their arguments? The FSA is trying to remove provider influence form the advice process, the method of achieving it is drastic and , some may say, unworkable, particularly when the insurance sector doesn’t have to disclose one groat of sometimes obscene commissions at larger firms, why is that? We need regulatory balance, I see none. More importantly, if IFAs really do want to survive they need to work together, unless of course they want to bump up the value of their own firm of course, come to think of it, is Andrew Fisher a qualified and/or experienced IFA?

  3. Towry Law’s website says: Our minimum investment amount is £100,000 and there is a 1.5% initial charge for investments up to £250,000. Above £250,000 the initial charge is reduced to 1%. We have a tiered annual charge structure, which means that larger investment portfolios have lower charges. The annual charge on the total value for the first £100,000 that we manage is 2%, the next £150,000 is charged at 1.5%, the next £250,000 at 1% and amounts in excess of £500,000 are charged at 0.75% per annum. Some charges are subject to VAT.

    Thus Towry Law take a “fee” = 3.5% & thereafter 2% pa trail.

    A great many IFA’s would consider these fees to be rather high Mr Fisher. A spade is a spade whether you call it a fee or commission.

    PS: And before we have any comments To call a spade a spade is not an ethnic slur as it derives from an ancient Greek expression: _ta syka syka, te:n skaphe:n de skaphe:n onomasein = “to call a fig a fig, a trough a trough”. This is first recorded in Aristophanes’ play The Clouds (423 B.C.),

  4. I have no axe to grind one way or another on this debate. However, if by using the terms `pathetic` & `a rabble`, the intention was not to cause offence to those that disagree with him, what was Mr. Fisher’s intent? Obviously not reasoned debate. I trust the advice from his firm does not suffer from the same degree of inexactitude!

  5. Andrew Fishers comments seem even more odd now that Towry Law have just bought Edward Jones. Only 10% of Edward Jones FA’s are Diploma Qualifed, and they do not charge fees. The average Edward Jones client will not pay a fee and the portfolios are too small anyway. I think TL have made a massive mistake – allegedly paying £75million for Edward Jones! Most of the clients will go with the max exodus of advisers!

  6. If I understand the sale of Edward Jones to Towry Law correctly. TL are not paying Edward Jones for the business, apart from some recoverables after a set time period. Instead, Edward Jones are paying TL some $75 millionto compensate them for the costs of closing out the UK Edward Jones businesses, redundancy costs, lease charges etc. In all this, how are the clients of Edward Jones being treated fairly?

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