The evolution of adviser charging models in practice

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The evolution of adviser charging models in
practice

• Dennis Hall Yellowtail Financial Planning
• Adam Young Dragonfly Planning

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Objectives for the Business

• To develop a valuable client centric proposition
• To provide services that a client wants and needs
  at a commercially viable price

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Understanding your target market

• Positioning your suite of services (and skills)
  around opportunities and threats that your target
  market are facing
• Becoming the go to specialist in that
  sector/market
• Building a trusted relationship and community to
  enhance your services

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The Solutions ......

• Avoiding product noise.......

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Dragonfly Evolution
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Attributes for Success
VALUE
Source JP Morgan
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Dragonflys Journey Perspective

• The world is changing, and we must adapt to
  survive
• Working on a pure fee basis has removed perceived
  conflict of interest
• Our primary operational model is based on flat
  fees renewed annually

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Yellowtail story fees version 1.0

• Single (value based) fee - our wish list
• Easy to understand
• Rewarded us for advice on other assets
• Removed any product biases
• Alignment of interests
• Attractive to long term client relationships
• Sustainable
• RDR ready
• Market advantage
• Removed from commission model

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Yellowtail story fees version 1.0

• Single (value based) fee - results
• Lasted less than a year
• Existing clients initially accepted it
• Prospective clients sceptical
• Nobody liked it (including us)
• Raised more questions than it answered
• Horse trading over value of other assets

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Yellowtail story fees version 2.0

• Range of tiered fixed fees
• Sign on fee
• Negotiate from 5,000
• Annual fees based on AUM
• Broadly 0.5 or less
• Focus on Financial Planning
• Annual or more frequent reviews
• Capped
• Calculated on an underlying hourly rate

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Yellowtail story fees version 2.0

• Range of tiered fixed fees the results
• Easier to explain
• Too much negotiating on the initial fee
• Too much emphasis on Financial Planning
• Sold lots of financial plans
• Didnt build AUM quickly
• Difficult cash-flow position
• Trouble with value proposition during credit
  crunch
• Doing more work than we were being paid for

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Yellowtail story fees version 3.0

• Fixed, Hourly and Value Based Fees.
• Financial Planning Fee 50 up front - 50 on
  completion
• 2,500VAT initial
• Implementation fee based on hours spent (VAT
  exempt)
• Value based fee 0.5 AUM (VAT)
• Introduced Satisfaction Guarantee
• Created value proposition for financial planning
• Sample menu of charges for implementation

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Yellowtail story fees version 3.0

• Fixed, Hourly and Value Based fees Results
• Attracted financial planning work
• A barrier to people wanting long term
  relationship
• Better cash-flow but long time before AUM
  increased
• Clients nervous about hourly fees
• Happy to pay fees for each stage
• Still not making decent profit

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Yellowtail story fees version 4.0

• Fixed, Value and Value Based Fees
• Kept the initial fee the same
• Changed to value based fees for implementation
• Increased the ongoing AUM from 0.5 to 1 on
  first 1m
• 0.35 funds in excess of 1m
• Additional project fees for planning

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Yellowtail story fees version 4.0

• Fixed, Value and Value Based Fees Results
• Increased revenue best ever half year results
• Lost some clients who wanted cheap work
• Appeals to our HNW clients
• Better client engagement
• Moved everybody across

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Yellowtail story fees version 4.1

• Fixed, Value and Value Based Fees next
• Reduce the costs of entry
• Speed up the pace of engagement
• Refine the menu of additional services
• Sell higher value planning

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Professional Partnering
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Freedom....
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