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Aegis Financial Consulting

I was browsing the web this morning and saw a post from someone asking whether they were being offered a good deal when it came to financial planning.  The rules of that site don’t allow me to step in and say “no, that’s a terrible deal, here’s what you would get if you came to me instead”, but here there are no such restrictions.  As such, here is a great example of the benefits of fixed fees.

Background

This particular individual was talking about receiving a £350,000 inheritance.  They had little idea what to do with it, so were (rightly, in my view) looking at the options for receiving financial advice.  In this particular instance, they had received an offer to provide advice for 3% of the amount in question as an up front fee and 1% a year for ongoing servicing.  How does this stack up with the Aegis Financial Consulting model, and can I therefore use this to demonstrate the benefits of fixed fees?

What it Means

Importantly, the innocuous-sounding 3% and 1% figures have much more ominous appearances when expressed in pounds and pence.  3% of £350,000 is £10,500, though the firm in question did agree to cap their fee at £10,000, representing a £500 discount in this case.

Then the annual fee kicks in, and that runs to £3,500 based on the initial value.  Importantly, this isn’t dependent on the actual complexity  of the portfolio or the tax structures being used therein.

What About Aegis Financial Consulting?

Here’s where the differences become immediately apparent.  Our fees are based on the complexity of your enquiry, not the value of investments you are bringing to the relationship.

For setting up a new investment case, our fees are £2,000.  There’s additional costs for things like pension assessments, but nothing about this case suggests that this is necessary.

For ongoing fees, our standard rate for a client who is looking to just make investments is £2,500 a year.  This increases to £5,000 a year if you also want us to look after your pensions, but if you are starting with just an investment portfolio, this would not apply.

As such, the fixed fees are cheaper in terms of initial costs and then cheaper in terms of ongoing fees.  In addition, the fixed fees are known quantities and you will not see an increase to this fee simply because you happen to generate some decent returns.

Other Firm
Aegis Financial Consulting
Saving at Aegis
Initial Fee
£10,000
£2,000
£8,000
Ongoing Fee
£3,500 p/a
£2,500 p/a
£1,000 p/a

What’s the Catch?

There really isn’t a catch.  The implication of a fixed fee model is that it can’t work for everyone.  We will never be able to offer good value for money for someone looking to invest their first £50,000 using this fixed fee approach, while paying 1% a year for that would mean getting a financial planner for £500 a year.  Definitely great if they do what you need them to do well, but in our experience, it’s just not cost-effective for a financial planner to offer a full service to such clients, so service levels tend to suffer.

In terms of what would be included in the Aegis Financial Consulting model, here’s a list:

  • Full fact find to discover information about you as a client.
  • Goal settings to set up targets for the investments.
  • Cash forecasting to test the robustness of the plan, including modelling of different inflation rates and market shocks.
  • Discussion on the different tax wrappers available to you (for most investments of this size, I would expect this to be limited to Individual Savings Accounts (ISAs), General Investment Accounts (GIAs) and maybe a pension).
  • Establishing an appropriate split between cash, income-producing and growth assets based on your overall risk profile.
  • Recommendation of a suitable provider for each of the accounts required and assistance setting up the accounts in question.

You will undoubtedly see that this is not a reduced level of service compared to the companies charging five times as much.  This is just one example of the benefits of fixed fees.

Just in case the article was too long and boring for you, here’s the condensed version:

Fixed fees can save you thousands!

Get in touch if you’d like to find out how much you could save.

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