The evolution of adviser charging models in practice Dennis Hall – Yellowtail Financial Planning...
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Transcript of The evolution of adviser charging models in practice Dennis Hall – Yellowtail Financial Planning...
![Page 1: The evolution of adviser charging models in practice Dennis Hall – Yellowtail Financial Planning Adam Young – Dragonfly Planning.](https://reader035.fdocuments.us/reader035/viewer/2022081603/56649ede5503460f94beed54/html5/thumbnails/1.jpg)
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The evolution of adviser charging models in practiceDennis Hall – Yellowtail Financial PlanningAdam 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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Dragonfly’s 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
• Didn’t 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
• £2,500+VAT 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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