View more on these topics

Trevor Whiting: What do you think of my charging approach?

As we move towards the RDR deadline, and with many firms still grappling with their post-RDR propositions, we are asking advisers to share their charging models with the Money Marketing readership. Here, Core Financial’s Trevor Whiting explains the changes his firm has made. If you are interested in contributing to the debate pease email our head of news

Trevor Whiting MM blog

Where will adviser charging be, not just on 31 December, but a year or two from now, we do wonder.

On the basis that a business should be forward thinking, I proposed a different approach to many firms that we have now adopted as our adviser charging model.

Percentage charges clearly work against the interests of larger investors, but how do you create a model that acknowledges the growing risk of product advice as well as size of investment utilising hourly rates?

A knowing customer will happily pay fees if they understand how they are made up, arbitrary amounts serve only to add to past mistrust towards financial advisers.

Core Financial LLP’s adviser charging model costs out work based on the time it takes, splitting adviser time and admin time, each costed at different rates, not too unusual. But, how does this take account of the risk of advice?

Well, we apply two multipliers, firstly to the adviser time, a product multiplier based on the risk of the product plus a size multiplier based on the size of the investment. These are applied when the advice is given but not at review stage, unless an incremental investment is made. Even with the application of a size multiplier, the larger investors are suitably rewarded for committing more capital, as they should be, percentage led charges as noted above unfairly penalise these sought after clients.

So far our calculations have been accepted without question, in fact we have been complimented by clients on such a full description as to how their adviser charge is created. For those that insist on percentages we will also detail the charge as an expressed percentage, however never forget it is led solely by monetary charges.

A word on hourly charges: If a Solicitor, as an example, picks up a letter, reads it and thinks “I’ll look again at that later”, he may use 20 seconds of time but bill 6 minutes, or more. You can quickly see how modular timed charging can weigh against a client. Hence we firmly believe that charges should be levied on the time it actually takes to do the job, simple and fair.

Perhaps the biggest danger to advisers is the inability to convey the value of charges. The broad brush just doesn’t work, that is not an RDR thought it is simply the psychology of fee charging. Whilst we accept that profitability is under threat in 2013, an adviser charging structure will probably be more successful in so far as it is less opaque.

We constantly assess adviser charging structures that are a room of smoke and mirrors with one ultimate beneficiary, the adviser. Both consumer and adviser can prosper in 2013 as long as they are up front with each other. Yes it does of course work both ways and there will be more shopping around and this is healthy, but less so if the shopper is browsing due to lack of transparency in models put before them.

We are shortly introducing a new website that includes a case study example, so keep an eye open and good luck with your own RDR proposition. We are also working on an app to allow customers to calculate likely charges for advice.

Sustainability of any model will perhaps be tested by how you stay within the spirit of the intended change but consider using risk multipliers that are fair both to the adviser and their clients.

Editor’s note: In response to some of the comments, Trevor has added additional information regarding his charging structure:

We are approached by a Client that has a simple need to grow their investment portfolio over a defined period. The investment value is £100,000. After the first meeting which is free and without obligation, we agree objectives and set about designing the most appropriate strategy and products (where necessary) to achieve the desired outcome. Now let’s assume for simplicity purposes that we assist the client in selecting an appropriate composition of unit trusts/Oeics, perhaps utilising Isa allowances where we can.

We first cost out the time it takes to do the work, this is split between advisory time (£150 per hour) and administration time (£75 per hour):-

Example only:

2 hours advisory time. =. £300.00

3 hours admin time. =. £225.00

Total. =. £525.00

That is the basic price of advice, on top of which we add a product multiplier (in this case 1.1) and then a size multiplier for this size of investment it would be 1.35.

So, the final advice fee would be £525 x1.1 x1.35 = £779.63,or, as an expressed percentage, 0.78 per cent.

If as often we agree a regular review this is costed also on the ‘time it takes to do the work’ but does not involve product and size multipliers.

Trevor Whiting is partner at Core Financial LLP


News and expert analysis straight to your inbox

Sign up


There are 14 comments at the moment, we would love to hear your opinion too.

  1. Nicholas Pleasure 15th October 2012 at 2:58 pm

    This is a rather pointless feature if the authors don’t actually explain what their charging structure is.

  2. Hi,

    I’d really like to know what you think of my charging approach.

    What is it??

    I’m not going to tell you that!! Commercial confidentiality. Let me just say that we have worked smarter to devise a structure that utilises the risk of advice and accepts the psychology of fee charging without resorting to an hourly rate, gives transparency and sustainability with the aim of being a forward looking, new model business.

    What a load of old horse-poo

  3. My blog as you will read focuses on broad principles. Of course there are lot more details and it is about properly costing out charges so a Customer can evidence for themselves the value received.

  4. Your website
    Discretionary settlement and royalty payments but clients don’t pay more, very transparent and demonstrates such a modern rdr practice!

  5. So will that be 1% for most cases and a bit less for those that are larger?

    One thing puzzling me about the whole RDR thing is the general [or implied] assumption that anything being done before 1.1.2013 is inherently wrong and everyone has to change everything.

    We were at a Standard Life seminar last week which was looking mostly at ‘adviser charging’. We’ve done this for the last 6 years and called it ‘agreed remuneration’ but unfortunately Standard called it ‘commission’ which it wasn’t. So come 1.1.13 it all has to change; except it doesn’t!

    This isn’t a dig at Standard by the way with whom we have a perfectly fine relationship. I am however reminded of the dogma surrounding the introduction of the Euro. Does anyone remember the Ecu, what was wrong with that? [Ok don’t mention Greece, Spain, Portugal, Ireland etc – that’s a different story!]

  6. We're All Doomed!! 16th October 2012 at 9:20 am

    The question about adviser charging that I want an answer to is not “How much am I going to charge?”

    It is, of course, “How am I going to charge it?” In other words, will the product provider support my charging methodology? – Maybe, maybe not!

    If the provider doesn’t support my chosen mechanism on ongoing and/or trail fees, am I really going to be issuing invoices to my clients? – What if they don’t pay? What do I do then? Are they VATable/non-VATable?

    A close look at some of the providers websites shows a very painful story, with many proposed adviser charging models clearly not being supported.

    And then there is the illustration….. if the provider does not support the charging model, how on earth is an accurate illustration going to be produced?

  7. Its good to see different ways of doing things and thats an interesting approach; one area in particular intrigues me – “A Product multiplier based on the risk of the product”. The calculations behind this scale would be interesting to see (whats the difference betwen the least and most risky??), but also, how can this factor be known (and hence calculated and communicated to the client) before the strategy and research work has been done to determine the precise mix of products? I thought clients had to agree advice charges upfront? Or are you doing the work for nothing even after the first meeting?
    Also, it could be argued that this approach actually creates an incentive (resistable no doubt but present nevertheless) to recommend “riskier” products, in order to increase turnover?

  8. Isn’t the use of multipliers etc.. sort of over engineering the solution.

    The question is what you charge, and that is down to each of us. In the example above I think the charge is simply not economic when you consider the work / risk involved.

    What is wrong with a flat % ?

    We shouldn;t be frightened to charge as much as we think we are worth, but like accountants and solicitors.

  9. Anthony Rafferty 16th October 2012 at 2:29 pm

    Interesting approach Trevor and I think it’s fair, which is important. When I put myself in the shoes of the consumer though, I’m left feeling why I should pay you more when I’m also taking on more risk, if it’s not taken you more time to come up with that recommendation. I get it as an industry person, but not a consumer. It would be good to hear more about what sort of initial feedback you get from you clients.

  10. Nicholas Pleasure 16th October 2012 at 5:41 pm

    Thanks Trevor – I’m sorry for my earlier comment but your article really does make much more sense with some figures in. Whilst I don’t quite understand where your multipliers come from, I do understand the principle.

    What puzzles me though is that most IFA’s would previously have received £3,000 for this particular piece of work. Whilst that is probably too much I’m not sure that I could do it profitably for £800.

    What do others think?

  11. @ Nicholas, me neither.
    No account has been taken of overheads regulatory fees etc etc. You would soon be running at a loss.

  12. I’m confused.

    Hourly rates – fine. Then there’s a potentially reasonable risk multiplier, then a less reasonable product multiplier (how can this be known at outset or after one free meeting?).

    But a brief visit to the author’s website shows a long list of products and very little in the way of financial planning or client service propositions.

    Am I missing something?

  13. New Website should be launched in a few days, with reference to latest comment.

    Trevor Whiting

  14. I can see you’ve tried hard, but it’s not clear, it’s not fair on the consumer (i second that they shouldnt be charged more just for taking more risk!) and it’s not going to earn you enough money. Completely going against what RDR is about. Back to the drawing board…

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 advice.

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