I was trawling through Facebook this weekend and saw a post in one of the professional networking groups I’m part of. This specifically refers to St James’s Place, one of the largest restricted advice firms in the country. they may even be the largest – I honestly haven’t checked.
This particular report was for a client who had approached SJP for advice on £5 million investment. For this, SJP recommended an offshore bond, a pension, an ISA and a General Investment Account.
I have talked before about the use of fixed fees vs percentage charges, but this is one of the worst examples I have seen in recent years. They allegedly charged 4.5% on the offshore bond amount they advised on. That means £135,000 of initial charges for setting up an admittedly fairly complex portfolio, but the initial fees are enough to hire a well-qualified professional to work for you full time for a year, and there is no way that any adviser can make that fee value for money.
So what would I charge for this advice?
|
Item
|
Charge
|
|---|---|
|
Initial Cash Forecasting
|
£500
|
|
Establishing an investment strategy & setting up ISAs and GIA
|
£1,500
|
|
Assessing pension situation and opening pension
|
£2,000
|
|
Opening an offshore bond
|
£2,500
|
|
Total
|
£6,500
|
To put it in perspective, £6,500 is 4.8% of the SJP fee, less than a twentieth. Will that SJP adviser do more than 20 times the work that I do? No. Will that client get good value for money for their £135,000? No. In fact, they will likely be put into internal SJP funds, meaning they are paying an enormous up front fee for the privilege of paying an enormous ongoing fee for their investments.
If you have been in touch with SJP or any other adviser that is looking to charge a percentage fee for setting up a large portfolio like this, maybe do a bit of research into fixed fee advisers and get in touch to see if I can do better for far, far less.
