How we are paid
On receiving an enquiry we normally invite a prospective client to come to our offices for a preliminary meeting. The purpose of the meeting is firstly to establish whether we are able to assist with that person's needs and objectives and secondly to discuss how we would be paid for our services should we be instructed to proceed. There is no charge for this preliminary meeting and no obligation on either side.
When it comes to carrying out work for which we are paid, three payment options are available – fees paid direct by you, payment by commission from product providers, or a combination of both. Where our recommendations would not give rise to the possibility of commission receipts we would have to charge a fee.
Although we offer to work for an hourly fee, in general we find that this does not fit comfortably with the benefits of developing and maintaining an ongoing relationship with our clients. To do our job properly we often need to spend time finding out about a client’s family, and his or her personal and financial aspirations – and this takes time. ‘Clockwatching’ can seriously detract from building the personal relationship that we have with most of our clients. Furthermore, few people like the ‘open chequebook’ nature of an hourly rate.
A second fee option is to agree a fixed fee for carrying out a specific task. Whilst this might be appropriate in many circumstances, it does not always cover the more broadly based ‘financial planning’ function which involves ongoing contact with clients. An ongoing retaining fee might be more appropriate in this situation.
Commissions paid by a financial product provider, usually an insurance company or an investment house, for the successful placing of business are much maligned, but in many cases provide a very good method of payment. The reasons for this are:
- There is no need for the client to write a cheque (often from taxed income) in addition to paying for the product.
- There is no VAT on commissions paid by product providers.
- You can sometimes obtain tax relief on the product charge (e.g. when making a pension contribution)
- Many product providers pay commission which is not directly related to the costs paid by the client for a product (e.g.from their marketing budget). This means that the client effectively pays less than we would otherwise need to charge as a fee.
- In some cases the product charge is not reduced even if no commission is paid – the product provider just keeps the money!
Sometimes commission alone will not meet the costs involved. In these circumstance we may agree that payment should include both a fee and commission.
Whether we take our remuneration by way of commission or fees will be a matter of discussion and agreement, and no charges for fees will be made without prior notification in writing.