Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
To
Top
The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
To
Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
To
Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
Printer Friendly Version
To
view the printer friendly version you will need Adobe Acrobat
Reader. This software is provided free of charge and can be
downloaded by clicking on the icon below.
Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
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Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
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Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to cover the costs of future servicing of such products.
Paying by Fee with Commission
Offset - We will again agree an estimated total
cost figure for each particular area of advice. However,
we will use a system referred to as ‘commission offset’.
In other words, if we are to receive commission for arranging any investment
or financial product as part of our advice, we will ‘offset’ that
commission against the agreed fee. Such offsetting could be used
directly to reduce the fee; or it could be used to reduce the product charges
to your benefit; or to increase the investment amount. If the total commission
exceeds the agreed fee we will not pay the excess to you. The same choices
are available to cover the servicing of any investment or financial product
as detailed under the previous option ‘Paying by Fee’.
Paying by Commission -
If the advice you require involves arranging one or more investment
or financial products, we will normally be entitled
to receive commission from the product provider. In
such circumstances we could agree with you not to charge a
fee but to cover our costs by the indirect payment of commission
from the product provider. Such commission would normally
be paid out of the standard charges on the product and would
not be in addition to them. This is not always the
case as some products have no commission automatically built
in but we can arrange with the product provider to include
a commission payment to us out of your investment. Where the
initial advice is on a commission basis we would normally
receive ongoing renewal or ‘fund based’ commissions to
cover the costs of future servicing of such products. Receiving
commission in this way, even though you pay nothing to us directly, does
not mean that our service is free. You still pay us
indirectly through the product charges. Product charges pay
for the product provider’s own costs and any commission.
These charges reduce the amount left for investment. If you
were to buy direct, the product charges could be the same as
when buying through us, or they could be higher or lower. We
will tell you how much the commission will be before
you complete an investment, but you may ask for this information
earlier.
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The Cost of Our Services for Clients
Many of our clients start out as customers,
requesting advice on one-off areas of their financial planning but
then develop over time into clients. Other people require
to be treated as clients from the outset. Although clients
generally have the same three choices of paying for our services
as identified for customers there is one difference in that we will
want to make sure that there is sufficient ongoing fees or commission to
cover our ongoing service commitment. There would be no problem
where the client had either agreed ongoing fees or where the
fund based renewal commission was large enough to cover our costs.
Where this is not likely to be the case we
ask the client to set up a monthly direct debit to
provide a minimum fee income to ourselves. At the present time this
will range from £10 to £50 a month depending
on the estimated servicing requirements involved.
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Top
Nothing is for nothing
The old adage ‘there is no such thing
as a free lunch’ applies equally to your use of a financial
adviser. You will not go far wrong if you reconcile yourself
to the fact that you are paying for the services of your
financial adviser whether he or she represents just
one product provider, or is an independent financial adviser
(IFA) or anything in between.
It is also important to realise that nearly
all ‘retail’ financial products, that is those available
to individual investors, have costs built into them for
marketing that product. If you walk into a High Street
bank or building society to deposit your cash there appear
to be no charges. However, the interest rate you receive
reflects the costs of that High Street position and the staff
who are there to greet you. You may decide to access
the internet to cut out the cost of those High Street
premises and staff to obtain a higher interest rate, however
the interest rate you receive will still reflect the high amount
spent on advertising by internet banks.
It is still the case that the majority of customers of financial advisers,
whether those advisers are restricted in the advice they can give, or are fully
independent, do not pass over any fees for the services of their financial
adviser. However, as we have tried to show by our choice of payment
models, that adviser is being paid by you in one form or another.
Your adviser will quite rightly point out that
commission is normally part of the standard charges on the product
and not an additional cost to you. Whilst this is true, it nevertheless
should not remove from you the knowledge that you are
paying, albeit indirectly, for the advice that you have received
and the arrangement of any investment or financial products.
It is in your interests to make sure that you are aware what
the commission payment or credit to your adviser is in £ sterling.
Many financial advisers are now salaried but this does not mean that
they do not have the same direct financial interest in the investments
and financial products that they are arranging for you. If you and others like
you do not use their services, their salary will soon be reduced or removed
altogether.
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Top
Which is the best payment option?
It really comes down to the option
with which you are the most comfortable. Some customers
are happy writing cheques to us and some would prefer any such
payments to be indirectly taken from their investment and financial
products.
It is generally true that the larger
the amount you are investing, or the greater the amount
of financial product that you are purchasing, the more
the fee option becomes the best choice. However, that
is far from always being the case and it does, of course, depend
on the level of fees being charged.
It is important to realise that you
cannot simply compare the fee being quoted to the commission
amount that the IFA firm would otherwise receive.
Commission is a gross payment whereas any fee will
come out of your net income. If you are a higher
rate tax payer a £2,000 fee will really have cost you £3,333,
so £3,000 of commission, while seeming to be more,
could actually cost you less than a £2,000 fee.
To
Top
A Particular Query?
If you have a particular query
concerning the cost of our services please ask your usual
Arch adviser, telephone 01483 204600, or
email us on direct@arch-fp.co.uk.
To
Top
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Whenever we provide advice we
are calling upon many background resources that
may not be evident to our customers and clients. Not
all of these will be used on every occasion, of course,
but they are listed here to help you understand
what the payment we receive is really for.
Thequalifications
and experience of those who advise you.
We are reminded of the surgeon who was asked to
explain his large fee for a seemingly minor operation.
He explained ‘£100 is for carrying
out the operation and £2,000 is for knowing
what to do!’
The programme of continuous
professional development (CPD) that those
who advise you are required to undertake, both as
a regulatory requirement and a necessity to provide
suitable advice. This will include attending
a large number of workshops each year as
well as private study.
Our ongoing research.
The economic environment, both in the UK and internationally,
is constantly changing. Investment theory and
practice is constantly evolving. There are a
large number of product providers and the types
of products are constantly developing. The types
of investments available is constantly being added to;
there are hundreds of fund managers and thousands of
funds. An independent financial adviser (IFA) has to
spend a large part of his or her time carrying
out both generic and product specific research.
Whilst the latest computer software will help with this
it is debatable whether there has actually been a time
saving for the average IFA. In reality the IFA now finds
that he or she is simply carrying out more detailed
and comprehensive research than was previously
possible.
Our administrative costs.
The costs of technology, staffing and running our business eat
up over half of the total income that we receive.
Our regulatory fees and
professional indemnity insurance premiums are now
a significant part of our expenditure. In addition we pay
for external compliance assistance to threesixty services
LLP.
Our profit - hopefully! You will
see from the following chart that this is not a large part
of the equation.
To
Top
Why do we refer to customers and clients?
It may help to say that there are three
different ways of using our services and the cost
of those services will vary depending upon which type of service
you use.
‘Execution Only’ Customer
This is where you know exactly what you want
and no advice is sought or expected. There are
a very limited number of situations where this would apply but
when it does we are able to reduce our costs because
we can remove the costs of our qualifications, CPD and research.
Where you wish to deal with us on an ‘execution
only’ basis you should refer to execution
only or telephone 01483 204600 or email direct@arch-fp.co.uk to
agree our commission or fee terms before submitting the business
via us.
Customers
You may require advice from us to
arrange a pension, an investment, or mortgage. It may be to arrange
your affairs to reduce the impact of inheritance tax,
deal with the nursing home costs of a relative or set up investments
for your children. In each case you are looking for someone
to advise you on a particular project. You are our customer
and you will pay for the particular service or services
you require, whether directly in the form of a fee,
or indirectly by means of commission from a product provider.
You may use our services once or a number of times but
on each occasion you are our customer and we will provide you
with the best service that we can.
At the present time Arch Financial
Planning Limited has around 6,500 customers for which
we have records on our client computer database.
Clients
Some of our customers have a different
relationship with us and become our clients. These
are people who look to us on an ongoing basis as their
financial advisers and planners. They may be wealthy
individuals with a portfolio of investments or pension funds
that need regular reviews. On the other hand they may
have more mundane financial circumstances but recognise
the importance of gaining independent financial planning advice
throughout all of their financial journey.
We will seek to set up an arrangement with
our clients so that they are aware what they can expect
from us on an ongoing basis. This would usually include an
annual or more frequent review and monthly information
of a general financial planning nature via our email
newsletter, MoneyTalk, or a paper copy of this.
We would not expect more than 20% of
our customers to be designated as ‘clients’ and
we are currently in the process of identifying these clients.
The major difference between customers and clients as far as
payment for our services is concerned is that we would seek
to arrange our fees or commissions in such a way that we
receive an ongoing amount from our clients. As we
are more concerned with obtaining such an ongoing amount from
our clients they will often benefit over the total cost of
our services charged to our customers.
To
Top
The Cost of an Initial Meeting with New Customers/Clients
Before you can decide whether you want to use
our services and we can decide whether our services are appropriate
for you, it is obviously necessary to exchange some initial
information.
We therefore usually make no charge
for an initial meeting of up to one hour at our office.
The same can apply to an initial meeting at your home or office,
although this depends on the distance that the adviser has
to travel. You will be informed beforehand if
a fee is required for a first meeting.
The purpose of the meeting is to identify
what your requirements are, answer any questions
about our business and, if appropriate, complete our
Fact Find which gives us a detailed picture of your
personal financial circumstances.
If you wish to use our services on an ‘execution
only’ basis then the meeting would usually be much
shorter as it would not be necessary to complete a Fact
Find.
At that meeting our adviser would also provide
a number of regulatory items such as his or her business card,
our Terms of Business, and two ‘KeyFacts’ documents
entitled KeyFacts about our services and KeyFacts about the cost
of our services.
We would normally follow up that meeting
with a letter identifying what we believe your requirements
to be, whether we believe our services would be appropriate
for you and what the cost would be if you
wish us to proceed.
To
Top
The Cost of Our Services for Customers
We would usually discuss an outline of our
costs at our first meeting once we are aware of your requirements,
or provide this in the follow up letter.
Where possible we offer customers a
choice as to how to pay for our services. However,
in some circumstances we would have no option but to charge
a fee. This would be the case where there is no possibility
of commission payments from a product provider or where
any such commission that is payable does not properly reflect
the work which we will have to undertake in advising
you and arranging the investments or other financial products.
Paying by Fee -
We will provide you with details of our hourly rate although
we find that most customers prefer to agree to an estimated
total cost figure for each particular area of advice.
If we are to arrange any investment or financial product as
part of our advice, we will do so, where possible, on a nil
commission basis. It may be appropriate for you to pay
a fee to provide the initial advice and arrange any
investment or financial product, together with a smaller
annual fee to cover the servicing of such products.
Alternatively we may agree to charge a fee to provide the initial
advice and arrange any investment or financial product but
then receive ongoing renewal or ‘fund based’ commissions
to
