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

Introduction

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

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

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

Cost savings of around £2,500 per year vs DIY

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 focused solely on how this client saved money!

Cherry picking?

These clients were a perfect fit for our retirement planning offering, and we beleive we can easily add value to cover the fees we charge. There are some for whom we are not a good 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). The average St James Place client has around £190,000 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 Pyrford Financial Planning's total fees of 0.85%.

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 stock market is incredibly difficult to outperform, and we don't consider paying fund managers large sums a good use of our clients' money.

Flat adviser fees

We make no apologies for the fact 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 per year, which will increase 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, under the flat-fee model, the adviser doesn't get paid less if the client starts spending their money in retirement (which 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 investors to realise the fees 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 DIY basis.

About Pyrford Financial Planning

Pyrford Financial Planning is an Independent Financial Adviser based in Weybridge, Surrey.

We specialise in retirement planning and provide independent financial advice, including pension and investment advice, and inheritance tax planning.

We offer a no-obligation introductory meeting, which will be held over Zoom.

Our office telephone number is 01932 645150.

Our address is No. 5 The Heights, Weybridge, Surrey, 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.

About the author

Noel is passionate about helping clients plan for retirement, preparing and guiding them through this key life transition. He has written a book on retirement planning and regularly publishes retirement research on this blog.