There was a great article in this weekends FT, written by my friend, Jason Butler.
The headline read ‘You Need A Financial Plan, Not an Expensive Portfolio'
If you have an FT account you can read the full article here: https://t.co/REsx6v2iXy
Otherwise, here’s an overview…
The article states:
“The majority of financial advisers and private banks talk a good story about providing financial planning. In reality they are primarily interested in managing an investment portfolio in return for charging a fee calculated as a percentage of the portfolio value.
But what if you wish to invest in a second property, art or wine? What if the best advice is to hold all your capital in cash and National Savings products - or spend it, or give it all away?”
It said: “There are some decent financial planning firms that provide comprehensive financial planning. But many have an inherent conflict of interest, because they are wedded to the percentage of assets charging model, which causes adviser and client to focus on investment, when strategic financial planning is where all the real value is derived.”
Furthermore, it states: “There can also be significant cross-subsidy of smaller clients by larger ones. For example, an investor with £1m invested can pay between 5-10 times more than a similar client with £100,000 invested, for broadly the same service.
Investment management, tax wrappers and life insurance products are fast becoming price-driven commodities. While most people really need a dynamic personal financial plan which will help them improve their financial outcomes, most are just getting an expensive commoditised portfolio management service. Or as someone once said, people are paying the price of a Picasso for painting by numbers.”
This message came across loud and clear at last year’s BACK2Y:
The article states: “This is not always the case: a small but growing number of financial planning firms are now ditching the traditional model in favour of a flat rate, fixed price annual planning and advice fee.
Capital Asset Management, a firm of chartered financial planners based in London, last year completed the conversion of all its clients to fixed annual fees for financial planning and investment management. Alan Smith, chief executive, says: “Gifting or spending their money can be a very sensible strategy for many clients and yet the percentage [of assets] model means that advisers may be reluctant to make such recommendations as their fee income would reduce. That is a fatal flaw in the model.”
For those of you interested, Alan, a member of Inspiring Advisers, spoke in detail on this subject at the second BACK2Y Conference. He explained why and how his firm had made the change - and how this can be immensely profitable.
Remember, flat fees can be - and should be - highly profitable IF you deliver REAL benefits.
You can see Alan’s full presentation here: (There’s no charge. It’s well worth watching).
Here’s the key: The value is in PROPER financial planning.
This is where Advisers can help clients to really understand where they are heading financially. This is where we can give clients permission to really live: to do more, to be more, to give more. This is where Advisers can really matter in the lives of their clients - to help them live a life well lived.
With the rise and rise of Robo Adviser offerings - and with the success of the likes of Nutmeg - not to mention Hargreaves Lansdown, the threat facing investment focussed Advisers is very real. Ignore at your peril.
The recent publication of the so called ‘Top 100 Advisers’ by New Model Adviser had, to my mind, a disgusting feel to it. It was all about the money. Measured by assets under management. And ‘profit’ of all those concerned. Many were portrayed as Planners, where in fact most seem to be just ‘asset gatherers’. In fact some Advisers - no doubt influenced by New Model Adviser - spoke about the assets as if they were theirs, not their clients!
There was little or no reference to CLIENT OUTCOMES. There was no reference to what’s in it for the client. (Just wait till the consumer financial press start to get a hold of the information contained in reports like the ‘Top 100 Adviser’ lists. It’s going to happen.)
It’s all gone a bit mad. But then, that’s the Financial Services industry for you. It doesn’t care about the client. It only cares about the money.
The old ‘Industry’ habits will be hard to break. But they need to break. Or they will break the firms who stick to these outdated ways of thinking.
As clients start to wake up to what they are paying in fees, as they will, particularly when their investments are falling or have fallen in value, these ‘asset gatherers’ will start to see those assets walk out of the door. Those advisers delivering meaningful outcomes for clients through the consistent delivery of proper financial planning will be the ones who attract those clients.
Client to new Adviser: “You mean you’ll do ALL THIS for me and it won’t cost me a penny more than I’m paying my existing ‘new model’ adviser?”
New Adviser: “Absolutely!”
Client: “Where do I sign?!”
Delivering PROPER financial planning is where you earn your stripes, and your fees. Most Advisers aren’t doing this. And this is an incredible opportunity for those few that do.
So, if you are interested in avoiding the biggest problem facing most Advisers today - particularly those who are charging “Picasso prices for painting by numbers” - do yourself a favour: grab yourself a seat at BACK2Y - the Lifestyle Financial Planning Conference.
BACK2Y - The Lifestyle Financial Planning Conference is THE Conference for Advisers who wish to be at the forefront of the financial planning profession in the years ahead by delivering a truly client focused service. One that delivers tangible benefits to clients and so GUARANTEES that you get well paid.
To book your ticket to this years event, go here: www.BACK2Y.co.uk
To check out Alan Smith talking about fees, go here: https://inspiringmoney.leadpages.co/back2y2015-alan-smith-presentation/
If you want to miss out the part where he reveals how I got his lovely wife pregnant, then just start the video at the 13 minute point! :-)