Financial Advisor Fees

LHW99

There’s no more work to review a £200k fund or a £250k fund.

Although the insurance costs will probably be greater as the amount increases, as would the paperwork to justify any changes (or lack of)

gm0

Per head count. Adviser can handle X customers.   Pot size AUM % delivers a smoothed amount each. 
0.75% smaller, 0.5% larger - for fixed costs - and to a cap.  Planned revenues. Pricing power.

Nobody should buy uncapped and high % AUM. It's a rip off.  Uncapped lower % prices could be less offensive but are likely a unicorn in practice.  Exploitative.

So uncapped is to be laughed at. And via rejection pushed to the edges and out of the market.   See also exit charges.

Just mention S dot J dot P or the Q wealth managers in this forum and see what happens. Though the opprobrium they attract here applies as a health warning to the whole FA advice category not just to the well known ones.  People need advice competent in the things their wealth level and geographical domicile dictates.  Expertise in the problems - they face.  For the mostly poorer than international wealthy - UK domiciled folk who rock up here.   That's IFA over FA/Wealth Manager on cost - the services are regulated to the point they are the mostly the same.  The wealth manager product will be very likely be expensive alongside expensive advice but without being better.  It is what it is.  You have to find one you can tolerate and can bring yourself to trust. 
Or it's the pain and joys of DIY.

An MSE approach.  Caveat Emptor.  

Look for independent. Look for fair to fund value market prices, and capped costs with known declared terms.  Any dissembling.  Immediately dropped from consideration.  As clearly untrustworthy. So an unsuitable adviser sic.


People don't check enough.  Wealth managers are skilled sales people. Behavioural confidence building patter. 
With healthy businesses.  Some more reasonable advisers exist of course - and build a good stable of customers and AUM - and then some of them sell their book to a wealth manager as they move on to the next thing or retire.  Starting the process all over again for those customers - now stranded in a world that wants to "suitably" move them on to something that they should not really touch with a barge pole.

What to do - If you start by assuming that it is all going to be a bit spivvy. 

And move on to check all details very carefully contractually up front.  In writing.  
Prior to committing.  

Their lips are moving. It's probably lies (or at least distortions of omission).   
Then you won't be surprised or disappointed.  Occasionally modestly delighted by well priced and well delivered services building some trust.

You know it makes sense.

GeoffTF

magd36 said:

Thanks for the replies. It doesn’t feel right that the on going percentage is applied to the total value of funds. There’s no more work to review a £200k fund or a £250k fund. In fact the amount to review should be fixed based on the type of investment not its value. It’s pushing me towards arranging additional investments myself. A tiered approach seems a lot more reasonable and a one off payment for setup. Thanks all.

There are IFAs who will work for a fixed fee. The fixed fee may not be cheap though. Try Google. There is no reason why you should not shop around and negotiate a fee.

Albermarle

magd36 said:

Thanks for the replies. It doesn’t feel right that the on going percentage is applied to the total value of funds. There’s no more work to review a £200k fund or a £250k fund. In fact the amount to review should be fixed based on the type of investment not its value. It’s pushing me towards arranging additional investments myself. A tiered approach seems a lot more reasonable and a one off payment for setup. Thanks all.

As the total funds grow in size, you may be able to negotiate a lower ongoing %.
It will vary from IFA to IFA but I think typically if you have a half a Million plus, you should be able to get it down to 0.5%.

dunstonh

It doesn’t feel right that the on going percentage is applied to the total value of funds.

Generally, the more wealth you have, the more work there is.     Yes, there wont be much difference between £200k and £250k. but there has to be some simplicity to the charging structure.   Liability cost goes up with higher values.    A £20k ISA going wrong won't bankrupt a company.  £200k could cause some pain.   £2m could bankrupt the company.

If it were a fixed fee, then the person with £200k would be moaning that they are paying more relative to their fund than the person with £250k.    Plus, the fixed fee would be based on an average across their target market and existing client base.  It doesn't mean the fixed fee would be cheaper.

It is also worth noting that PI insurance, FCA, FSCS, FOS etc levies are all based on percentages.   So, each stage of the retail process involves percentages.

A tiered approach seems a lot more reasonable and a one off payment for setup. 

A lot of adviser firms operate tiers and caps and collars.

It will vary from IFA to IFA but I think typically if you have a half a Million plus, you should be able to get it down to 0.5%.

Exactly that.  Ideally, the IFA firm would already have tiering but its a relatively recent concept but increasingly common.   This years Lang Cat state of the nation call for research was asking advisers on whether they tier charges or not.  So, when that is published, it will be interesting to see how common it is.