There is room for all fee models to coexist together in the industry, according to Sarah Lord, managing director at Stonewood Financial Planning.
Speaking at the FTAdviser Financial Advice Forum 2023 last week (September 28), Lord explained that her approach to fees has always been to work with clients on a fee for service basis rather than a percentage of assets under management.
“I've always been engaging clients on the basis of an hourly rate and then I fixed the fee for the work,” she said.
“There is a role for the percentage of AUM fee model. I also am a believer in the subscription model and the retainer basis.”
In her firm, she said the company looked at client needs, assets, values and age and used those key aspects of a client persona.
Lord said for a client segment, a retainer basis is the most appropriate way in which to charge the client for what they need.
“I do think clients are becoming more aware of fees, and the fees which are charged against their portfolios and the percentages,” she said,
“All models come under criticism from time to time - that raises awareness with clients and as long as you can look the client in the eye and say, I'm delivering value for the fee that I'm charging then all models can coexist together.
“I do think the key is giving transparency to the client about what you're doing for the fee that you're charging.”
RDR vs consumer duty
During the keynote session, Lord also discussed the retail distribution review and the recently launched consumer duty.
“It's kind of hard to believe that it's been a decade because we still, as a profession, talk about RDR,” she said.
Lord explained that for her, RDR was definitely the start of the evolution on this journey of professionalism.
“I remember at the time a lot of individuals in the profession were up in arms about what the FCA was trying to do but ultimately what it has done is made us evolve,” she said.
“We see a far higher level of qualification as standard because you have to be now.”
She said 10 years ago, people were surprised they had to be level four qualified and now people will say they want to achieve level six so it has driven up the level of qualification.
Around the time of RDR, Lord said there was the perception that advice was free because of the the use of commissions.
“The positive is that it's dispelled that myth that advice is free,” she said. “Pre RDR, commissions were used, and no charges applied, but there were actually lots of hidden commissions.
“It's absolutely driven transparency around fees and the cost of advice.
“There was definitely this perception by clients that financial advice was actually free.
“Personally, I think RDR has been a massive benefit to our profession. It's helped us on that journey. “
