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The evolution of adviser charging models in practice. Dennis Hall – Yellowtail Financial Planning Adam Young – Dragonfly Planning. 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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the evolution of adviser charging models in practice

The evolution of adviser charging models in practice

  • Dennis Hall – Yellowtail Financial Planning
  • Adam Young – Dragonfly Planning
objectives for the business
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
understanding your target market
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
the solutions
The Solutions ......
  • Avoiding product noise.......
attributes for success
Attributes for Success

VALUE

Source: JP Morgan

dragonfly s journey perspective
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
yellowtail story fees version 1 0
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
yellowtail story fees version 1 01
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
yellowtail story fees version 2 0
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
yellowtail story fees version 2 01
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
yellowtail story fees version 3 0
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
yellowtail story fees version 3 01
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
yellowtail story fees version 4 0
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
yellowtail story fees version 4 01
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
yellowtail story fees version 4 1
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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