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Financial Advisor That Charges Monthly Fees?
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hens00
Posts: 53 Forumite
I work self employed and recently moved into some office premises where I managed to meet a financial advisor who also works in the building.
I set up a meeting with him for some general advice and he then asked if I was willing to sign up with him as a client to look after my financial planning.
When I asked about charges, he stated that in addition to taking a small percentage commission fee, he also charged around £30 per month as a retainer.
From my quick research into financial advisors, I cant find many companies which charge this retainer fee. Is this a common practice?
I like the guy, and the fact that he works around the corner from me is a bonus. Im happy to pay the commission fees, but am unsure about whether I want to pay a monthly retainer fee. Any advice?
I set up a meeting with him for some general advice and he then asked if I was willing to sign up with him as a client to look after my financial planning.
When I asked about charges, he stated that in addition to taking a small percentage commission fee, he also charged around £30 per month as a retainer.
From my quick research into financial advisors, I cant find many companies which charge this retainer fee. Is this a common practice?
I like the guy, and the fact that he works around the corner from me is a bonus. Im happy to pay the commission fees, but am unsure about whether I want to pay a monthly retainer fee. Any advice?
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From my quick research into financial advisors, I cant find many companies which charge this retainer fee. Is this a common practice?
Yes it is a common fee option. Normally used by fee based advisers rather than commission based. e.g. a smaller transaction charge and a regular payment in return for services provided. This can be things like updates, reports, portfolio rebalancing, access to software supplied by the IFA (online portfolios, budget analysis, forecasting, lifestyling software etc).
Typically, you will find the fee is in place of commission and not in addition to and is just one of the many different charging models available. It wont suit some people but it will suit others.Im happy to pay the commission fees, but am unsure about whether I want to pay a monthly retainer fee. Any advice?
Fees are often cheaper than commission. From 2012, commission is effectively being outlawed for IFAs in place of a fee based structures so expect more variety in options in future.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Is there a limit to how much they can charge? Say his investor is quite new so may charge the £30 a month, only £360 a year, which for large sums (£10k+) is quite good.
But for your being an IFA and your £100k+ salary, surely you must charge at laest double this?0 -
Is there a limit to how much they can charge?
FSA just state that charges have to be reasonable. A firm in the centre of London could justify higher charges due to location for example. Or a prestige firm could charge more because of their reputation. Or a firm that doesnt need any more clients could charge more because of supply and demand.
At the end of the day, as long as the charges are disclosed and its detailed what you will get in return, then there is no problem with different models as long as they deliver on that.But for your being an IFA and your £100k+ salary, surely you must charge at laest double this?
I employ people so I earn from them as well as my own. Just like most owner/partner/director firms.
£30pm is not a bad retainer. I know some that use that method which charge £50pm. That said for £10k, the natural trail commission would be £50 over the year. So, £30pm would seem heavy for a small portfolio. The breakeven is £60,000. It all depends on what you get for the service and if that is viewed as value for money.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
FSA just state that charges have to be reasonable. A firm in the centre of London could justify higher charges due to location for example. Or a prestige firm could charge more because of their reputation. Or a firm that doesnt need any more clients could charge more because of supply and demand.
At the end of the day, as long as the charges are disclosed and its detailed what you will get in return, then there is no problem with different models as long as they deliver on that.
Ok yeh that makes sense.I employ people so I earn from them as well as my own. Just like most owner/partner/director firms.
£30pm is not a bad retainer. I know some that use that method which charge £50pm. That said for £10k, the natural trail commission would be £50 over the year. So, £30pm would seem heavy for a small portfolio. The breakeven is £60,000. It all depends on what you get for the service and if that is viewed as value for money.
The bit in bold. So for a £10k portfolio you would expect around £50 a year charge? (Just want to clarify... as thats 0.005%)
Obviously I know for large amounts = large charges because theres usually more work invovlved in getting a good portfolio for the amount.0 -
Ok yeh that makes sense.
The bit in bold. So for a £10k portfolio you would expect around £50 a year charge? (Just want to clarify... as thats 0.005%)
Obviously I know for large amounts = large charges because theres usually more work invovlved in getting a good portfolio for the amount.I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
Brain-in-gear alert...
£50 out of £10k is ½ of 1% which I believe is pretty standard for on-going commission.0 -
lol
silly billy Lokolo.
I was actually writing this post to say - But 50 / 10000 = 0.005, but then forgot to * 100
Its late ok? I got up at 1pmhad 3 hours sleep Friday night. I need a slap.
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Hey thanks for the heads up on the retainer fees. Ive done a little more research since posting this thread, and you are correct in stating that its usually a case of one or the other, but not both.
This was my first encounter with a financal advisor, and I think I will do some more research before making any decisions. Not too keen on paying both a monthly fee as well as comissions. I cant remember the exact percentages he charges, but I vaguely recall him mentioning two figures: 0.5 and 3% The 3% seems quite high in addition to the retainer fee.
A question on certification - the advisor holds a Cert PFS. Is this a 'reasonable' certification?0 -
A question on certification - the advisor holds a Cert PFS. Is this a 'reasonable' certification?
That is the required standard at the moment. Most IFAs have the certficate plus one or two of the higher exams rather than the lot. For example, they may not transact in certain areas and didnt see the need to take higher exams in that area but only in the are they did themselves. From 2012 though all IFAs will have to have diploma level (or level 4 equiv).This was my first encounter with a financal advisor, and I think I will do some more research before making any decisions. Not too keen on paying both a monthly fee as well as comissions. I cant remember the exact percentages he charges, but I vaguely recall him mentioning two figures: 0.5 and 3% The 3% seems quite high in addition to the retainer fee.
3% initial and 0.5% fund based trail commission is the typical maximum that you get on investments. The FSA publish details of what that average amount taken in (average of course meaning some take more, some take less) and that is currently coming out at 1.8% plus 0.5% fund based. You tend to find smaller transactions dont have the scope for much discounting but larger ones do.
To charge on top of taking full commission is greedy unless you really have something special to offer that can really justify it. Also from 2012, full commission and a retainer will not be possible. So, this adviser is going to have to change his business model between now and then.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
What you may need to do is decide what it is you expect to get for his charges and whether they're good value. It's always tempting to think that someone else will look after your money with nothing but your best interests at heart but where commission is involved that may not happen.
If he wants to both charge a fee and receive commission you may get the worst of both worlds. "Commission-bias" is a major problem with advisers and it's in an attempt to tackle the problem that, as Dunston has pointed out, the FSA will make the currently widespread practice of IFAs being commission based illegal by 2012.
It has been pointed out though that if IFAs are allowed to go down the route of Customer Agreed Remuneration (CAR) that will simply be commission by another name and little will have changed.
In rising markets the opposing interests of advisers and clients is less apparent but the problem has been highlighted this year when many investors have been encouraged to either invest or stay invested by IFAs regardless of the best interests of their clients.0
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