The vast majority of firms charge new clients an “initial fee” as well as a lower ongoing charge. Both fees are typically calculated as a percentage of assets, meaning the firms make more money as funds grow. In some circumstances fees bear no relation to the services provided, with wealthier savers paying the most.
Plunging returns on bonds and cash have put the fees charged by advisers under intense pressure. High charges have a clear consequence when growth is low – an investor has to work for more years before retirement, or take on more risk than they may be comfortable with, just to pay those fees. An adviser should be helping their clients reach retirement sooner or achieve the income they need in retirement without worry.
The majority of financial advisers and wealth managers run their businesses on a percentage fee model. So the more money invested, the higher the fee charged – both upfront and ongoing. Some advice firms are moving towards charging from a menu of one-off fees or hourly rates but very few have given up percentage charging altogether.
We believe in fixed fees that relate to the work undertaken and are clearly transparent.