Advisers critical of Bancroft Wealth’s widely publicised flat-fee model have questioned how comprehensive a service it can offer.
The South Wales-based firm announced it would charge its clients £500 a year for financial advice regardless of the size of their portfolio, rather than charging on a percentage of assets, a story that the made national newspapers over the weekend.
Bancroft Wealth founder Clive Russell, an IFA of 27 years, argued the model provided greater value for clients.
"The percentage-based fees charged by large, established wealth management firms come with guarantees of exponential growth, but only for the firms themselves," he said. "It's been well-documented how these opaque fee structures fund the lavish lifestyles of a privileged few rather than providing attractive returns."
Russell added Bancroft offered a "personalised, whole of market wealth management service with in-depth analysis" for clients, through web or telephone consultations.
How comprehensive is it?
Wingate Financial Planning Chartered financial planner Alistair Cunningham questioned how comprehensive Bancroft's service was, as it appeared not to include financial planning.
"It appears to be a very basic service they are providing. It would appear that this service is more risk profiling and the supply of an annual valuation," he said.
"My view would be first you do the financial planning, then you give the asset management advice. This would appear to be the other way around, and one assumes there will be asset management and platform fees. The issue is that there are direct to consumer services - like the ‘robos' - who offer asset management and risk profiling with an integrated cost. Arguably they're charging for something these direct-to-consumer services offer for ‘free'."
He added: "In my view, it's very hard, if not impossible, to give meaningful advice on someone's assets unless you've actually got a plan. You should understand what they have now and what they're likely to have in the future, this is financial planning."
Former IFA and founder of the Initiative for Financial Wellbeing Chris Budd said: "Financial planning means working out what a client wants from life, then spending their money on that. It is about helping to improve the level of wellbeing a person gets from their wealth. A flat fee of £500 for 'wealth management' is not going to address such issues.
"As long as the client is clear on what they are getting for their money, I have no problem with it, but let's make sure we are comparing like with like. To compare the 'effect of charges' between a simplistic, low cost 'wealth management' offering with a full financial planning service would be disingenuous."
LighthouseCarwood IFA Richard Beal questioned the viability of the firm's approach, given the time it takes to give suitable advice.
"I know how much time I spend with a client, understanding their background, getting to grips with what they're going to do - their objectives, risks, long term plan. Then you've got the regulatory hurdles to jump, which means you need to have a compliance back office that is going to oversee the commercial risks," he said.
"All that takes time and you must make a profit otherwise it goes bust."
Meanwhile, Cambridgeshire-based IFA Victor Sacks welcomed Bancroft's flat fee and said he hoped it would encourage more people to seek financial advice.
"We are not a one-size-fits-all profession. If someone is going to come in and talk about the importance of receiving financial advice, then great - the more people we have come in offering a service I think it's great, and then people have got a choice," he said.
But, Sacks added, attention to fee structures took away from the real issue affecting the advice industry, which was, in his opinion, people being scammed.
Wingate's Cunningham added that he did not see this new model as competition but that other firms doing the same thing just did not have the same mainstream media coverage.
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