It’s time to talk about financial planning fees. There’s percentage-based fees, hourly fees and fixed fees, but which way is right for you? At Balance: Wealth Planning, we charge fixed fees because that is what we think is fair. However, with 58% of the industry still charging percentage-based initial fees and over two-thirds of advisers charging ongoing fees as a percentage, why are we different?
In this article, we’ll be demystifying the different types of financial planning charges and offering up our two pennies worth on why we think fixed financial planning fees is fair.
Fixed fees vs percentage-based fees
With percentage-based fees, an adviser will charge a percentage of your investments. However, in our opinion, someone with £1,000,000 invested shouldn’t pay ten times as much as someone with £100,000 invested if they receive the same service. We also don’t think that someone’s wealth should influence the service they receive.
Fixed, all-inclusive fees represent the time, care and expertise needed to produce your bespoke financial plan, and help you implement it. In essence, you get what you pay for, without any hidden charges or extras.
The financial services industry has received a bad reputation in the past, and there is still some scepticism that surrounds it. The Retail Distribution Review in 2012 removed all trail commissions on new products, which was the first step towards a more transparent industry. And the profession is headed in the right direction, which we’re happy to be a part of this movement of change that challenges the traditional model.
Three benefits of a fixed financial planning fee
1. Knowing where you stand
With a fixed financial planning fee, you know exactly where you stand. The service you receive is clear, and the cost that comes with it is too. There’s no hidden charges or nasty surprises.
When you are charged a percentage, especially on an ongoing basis, the cost increases as your investment rise. Which on one hand, is great as you see the value of your portfolio go up, but are you receiving a different or improved service to go with the increased cost? We think not.
2. Getting the best advice
Whether your investments do well, or you withdraw from them, a fixed fee remains the same, as it’s not correlated to the value of your investments. This means the advice is not influenced by the pounds and pence you invest, and there’s no conflict. It truly is the best advice, tailored just for you.
3. You pay for planning
The expertise is in the planning, and this is what you pay for. It’s not linked to selling a product and how well that product does for you (a well-performing plan over the longer term should be a given if the plan is appropriate). The value added is through careful planning, tax savings, and structuring of your wealth, which all allow you to visualise and one day achieve your goals.
The different financial planning service levels
We calculate our fees based on the complexity of a client’s circumstances, the scope of the advice proposed, and the anticipated time cost of providing the service needed.
Initial service costs
We charge a fee for our initial service, irrespective of whether we recommend any financial products. Because we work on a holistic basis and each person’s circumstances and requirements differ, the cost can vary widely too. Fees often range between £2,000 – £12,000, but typically we charge between £4,000 – £8,000.
Ongoing service costs
For our ongoing service, we charge a fixed monthly fee. The depth of an ongoing service can vary greatly, so our fees reflect that. Fees can range between £125 – £833 per month, but typically we charge between £333 – £666 per month.
Getting what you pay for
We are a holistic financial planning company, which means we look at your entire financial situation, with lifetime wealth forecasting, investment management and contingency planning and tax planning all provided.
Our job is to organise your finances so that your money is working harder for you, which in turn will improve your financial situation in the long run. The value of our advice isn’t just linked to investment performance, and the most beneficial parts to financial planning don’t have a monetary value attached, there are huge emotional benefits of working with a financial adviser.
We start with a free discovery meeting that helps us create a clear picture of your financial situation, your aspirations, as well as any priorities or concerns. Then we build a proposal detailing the planning we’d suggest that will help you get closer to where you want to be in life. Which also includes a clear breakdown of our costs.
Then comes the plan, which we carefully prepare before we meet again. At the next meeting we discuss your plan in great detail so you can visualise everything coming together and see a clear picture of your future self. And we don’t just leave it there; we also provide an ongoing service. We’ll be there to keep you on the right track to achieve your goals and update your plan as and when your situation changes.
For more information on working with us, you can read our ‘what we do and how we charge’ document here.