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  • Writer's pictureNoel Watson

D.I.Why? When financial advice costs less than Doing It Yourself

Updated: Feb 12


Introduction


It's not uncommon for our clients to reduce fees when they transition across from managing their retirement planning on a non-advised basis (DIY) basis to our ongoing financial planning and advice service. Below we look at a recent case where a client had hitherto held their investment funds on a couple of retail platforms.



The top level: a saving of £2,500 a year


On an investment pot of around £1.45m, our client will save around £2,500 a year versus their current non-advised offering.



Of course, we could talk about how we deliver huge value to our clients and help prevent them from making expensive mistakes with their retirement planning, but this blog is solely focused on how this client saved money!



Cherry picking?


These clients were a perfect fit for our retirement planning offering, and we feel we can easily add value to cover the fees we charge. There are some for whom we are not as good a match, including those whose retirement pot means our fees are too high to make it worthwhile engaging. We made this point when we analysed St James's Place fees (and performance). Their average client has £175,000 invested, and at this level, Pyrford Financial Planning would struggle to provide a profitable full financial planning service and would suggest to the client that alternative adviser offerings are probably better suited to their situation. Conversely, for the clients featured in this blog with around £1.45m invested, St James's Place annual fees would be around double the 0.85% Pyrford financial planning fee.



Investment costs


The standout difference between the two offerings is investment costs - we are saving our clients over £8,000 per year! We believe investment management is commoditised, and keeping costs low is essential to our investment philosophy and it's how we invest our clients' money. The market is incredibly difficult to outperform, and we don't consider paying fund managers large sums to be a good use of our clients' money.



Flat adviser fees


We make no apologies that the majority of the fees the client will now be paying will go to the adviser. We feel this is where the real value will be added, with investments (as mentioned above) and platforms being commoditised. For this client, we are charging a flat fee of £7,200 a year, increasing with inflation. We feel this removes as many biases as possible (there is no conflict-free fee model). We wrote about some of these biases in our guide to financial adviser fees, a key one being that with the flat fee model, the adviser doesn't get paid less if the client starts spending their money in retirement (it's something we actively encourage). An adviser charging on a conventional percentage-based model will have this (potential) conflict.



Conclusion


It can sometimes be a surprise for an investor to realise the fees that they are paying, with some often paying over 1% for fund management alone. Pyrford Financial Planning's robust and comprehensive retirement planning service can sometimes be a more cost-effective solution for clients with significant retirement savings than undertaking their retirement planning on a D.I.Y. basis.



Next steps


If you are currently managing your retirement funds and are in a similar position to the clients above, please get in touch with us - we'd love to talk to you.



About us


The team at Pyrford Financial Planning are highly qualified Independent Financial Advisers based in Weybridge, Surrey. We specialise in retirement planning and provide pension advice, investment advice and inheritance tax advice.


Our office telephone number is 01932 645150.


Our address is No 5 The Heights Weybridge KT13 0NY.


Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.


Although best efforts are made to ensure all information is accurate, you should not rely on this blog for your personal situation or planning.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


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