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. 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.......


Dragonfly evolution

Dragonfly Evolution


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


Professional partnering

Professional Partnering


Freedom

Freedom....


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