In ‘elevator pitch' style, PA asked readers to share their pricing plans for next year and beyond…
Clients don’t want to hear an hour-long pitch about pricing, and you don’t want to give one. So, Professional Adviser asked advisers to share their all-important Retail Distribution Review (RDR)-ready remuneration models in a nutshell. Here is how some will be earning in the brave new post-commission world...
Sheetal Radia, managing director, Financial Architecture
“My client proposition breaks down into three levels. The first is a full advisory fee based on a percentage of assets under management - the fee varies according to the type of organisation being advised. The second is a retainer model, with the fee dependent on the nature of the client and the complexity of their situation. The third is the ad hoc model, charged according to the work required.
Ten advisers share their pricing models
We have different tiers for the advisory work. There is a negative correlation between the value of assets under management and the fee. There are three tiers – a minimum of £500,000 under investment up to £2.5m; £2.5m to £5m; and anything over £5m. The fees are flexible but range between 0.4% and 1.75% across the tiers. The fact find and financial report is charged for separately. It is based on an hourly rate with additional charges for complexity. My hourly fee is between £190 and £210.”
Brian Hill, managing director, Jones Hill
“We are currently looking at the option of ‘outsourcing’ our investment proposition (to iBoss). This will ensure we focus more on client acquisition, engagement and retention and less on back office mechanics. An excellent example of how our charging model works is with pension consolidation: In this instance we charge a percentage of the total funds for the advice process; a fixed fee per provider and per plan for the implementation; and a percentage of funds under management for ongoing advice. The client is not required to have implementation or ongoing advice.
Clients then understand that, if they have two plans with one provider, they will pay significantly less than a client with five plans with five providers. We also explain that certain providers are easier to deal with than others: a Standard Life plan is, in our experience, significantly easier to deal with than one with Phoenix, for example. Clients who have plans with ‘poor administration’ providers pay more than those with ‘good administration’ providers. Advice is typically 1% - 2% of the fund value, with a minimum of £750. Implementation is £150 - £350 per provider + £75 per plan. Servicing is 0.25% - 1%, paid monthly with a minimum of £500 per one-on-one meeting.”
Henry Tapper, director, First Actuarial
“The First Actuarial charging model is based on the time we spend on the work and the cost of that time. Our charge-out rates vary between £80 and £320 per hour, plus VAT. All of our income is generated via fixed or time-cost fees. Time is recorded in ten minute sectors and billing is based on the number of units of time multiplied by the published rate of the employee.
Sometimes, we will guarantee a price for a piece of work and will absorb any overruns on a time-cost basis. We do not currently link our remuneration to funds under advice or to the contributions our clients pay.”
Viv King, managing director, VKPFA
“Most of the propositions I have seen so far seem to be based on charging for ‘advice’ with secondary payments for implementation. Our process – including the bits we do not charge for – is as follows: we will conduct a fact-find, which is non-regulated work we do for free, and then we’ll charge £295 for the also-unregulated work of producing a report outlining the client’s current situation and their future shortfalls. At step three, we will agree the client’s needs in generic terms and assess his or her attitude to risk (again, there is no charge), and then we will produce an independent comparison report, for which we charge £295. The suitability report will cost £495. The sixth step will involve implementing the policy, plan or scheme. Client servicing can be done via monthly subscription of, say, £30 per month – a bit like Denplan!”
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