Speaking with Financial Planning Today editor Kevin O’Donnell regarding the potential content for this column, things going on in my own business are always “hot topics” and fees and charges are one current issue.

Fidelity’s recent announcement of changes to the charging structure on their funds, introducing performance-based fees which they feel aligns their interests much more with their clients, ties in with our own internal debates on how we need to review and update the services we offer to our clients and how we charge.

As a consumer, it must be an absolute minefield – every adviser they see will offer a different charging structure – hourly fees, percentage based fees, value based fees...And what fees are charged at each stage, and what will they get in return?

There is an argument for standardising charging across the industry, but I am absolutely convinced this would not work, either for the consumer or for Financial Planning businesses. Whatever charging structure was opted for would suit some clients, but not others. And to dictate to us, as business owners, what and how we charge is simply incomprehensible – how does this take any account of the practices and running costs of my business compared with the next?

And what is the client actually getting? Do charges include fees for initial and ongoing Financial Planning services, or is it all product related? We think we offer an excellent, personalised and hands-on service to our clients, and we think we do this at reasonable cost. But, we see others charging less and potentially providing more (but do they?), and we see others charging far more and certainly providing nothing like the quality of service we offer. But, until the client is in the process, how do they know what they’re going to get?

So that leads me onto our own internal debate regarding how we charge for our services. Following a rebrand in 2016, we are now attracting many more of the types of clients we want to be working with and who are much more aligned with the quality of advice and service we offer. They are slightly higher net worth private individuals, but with more complicated Financial Plannin issues to contend with. But, we’re not entirely comfortable that our previous charging structure works with these new clients.

Although we confirm that we charge percentage-based fees, reducing for larger cases, we all know that this doesn’t always work – some tasks don’t involve investment, others are only small investments where the fee would nowhere near cover the costs, and for larger cases, the fee can sometimes be way too high (in my opinion, that is). So, we’ve been moving towards an hourly based charge, but does this take account of the risk attached, and how does it reflect value added? So, when calculating the fee, we now need to add a “risk factor”, but what should this be?

For ongoing services, we charge a percentage of assets under management. The challenge we have with this is that for clients with smaller investment portfolios, costs may not be covered, whilst for clients with larger portfolios it can end up being charged much higher fees than are may necessary. This has come to light recently when I’ve been asked to “pitch” to a Deputy in a Court of Protection case, where the client had been awarded a significant sum of money. Yes, there will be an awful lot of work to contend with, but I can see absolutely no justification in charging in excess of £100,000 per annum to this client. So what is the solution?

We’re working towards a minimum fixed fee annually, and then a much lower percentage of assets under management. I’m happy that a standard fee would apply for approximately 70% of our clients, with others, such as this particular case needing to be more “bespoke” to reflect the additional work that might be involved in such cases.

I know that I don’t have all the answers and there’s always “tweaking” be done, ensuring the right people are doing the right jobs in the most efficient way to reduce costs as much as possible. And of course we are reliant on providers giving us the right information in a timely manner – always a challenge.

Nicola Watts APFS Chartered Financial Planner, Chartered Wealth Manager, CFP^TM Chartered FSCI - director of Jane Smith Financial Planning

After joining the family business in 2000, Nicola qualified to provide advice in 2001, and has been a director of the business since 2006. Since the retirement of her mother (Jane Smith), Nicola bears sole responsibility for the management of the firm, and the advice provided to clients. Nicola is married to David and has two young children, Emily and Olivia, and Poppy the black labrador.