A wealth manager has launched to market with the promise of providing “fair fees forever” in the form of a flat fee for all.
Bancroft Wealth, a Welsh firm founded by an independent financial adviser, offers advice for a fee of £500 per year, a system it claims is fair as investors pay the same fee regardless of their portfolio size.
The firm is targeting investors who are willing to receive their advice digitally and over the phone, saying this minimises operating costs and allows it to charge a low fixed-fee to everyone regardless of portfolio size.
The firm also pledged to outperform major wealth management firms while ensuring “more money stays in investors’ pockets”.
Through Bancroft’s fee system, there is no initial cost for an assessment or to sign up to invest with the firm. Clients pay a £500 annual fee — either in monthly instalments or taken directly from the fund — and there is no charge to leave.
The firm said the fee represented better value than traditional percentage-based fees for any customer with a portfolio of more than £39,000.
For example, a client who invests £150,000 for five years with an average 4.5 per cent growth rate with Bancroft would pay £2,500 to their adviser and their pot would grow by about £26,000.
This would save clients around £9,000 over five years when compared with platform fees of 0.83 per cent and an adviser fee of 3 per cent upfront and 0.75 per cent ongoing, according to Bancroft.
The firm predicts the following savings for its clients assuming a 4.5 per cent growth rate and platform management fees of between 0.85 per cent and 0.93 per cent:
3 per cent upfront, 0.75 per cent on-going
Bancroft's £500 per year
Clive Russell, founder of Bancroft Wealth, said: “The percentage-based fees charged by large, established wealth management firms come with guarantees of exponential growth, but only for the firms themselves.
“It’s been well-documented how these opaque fee structures fund the lavish lifestyles of a privileged few rather than providing attractive returns for clients.”
Mr Russell said the system “didn’t seem fair” so he worked to find the “perfect, completely transparent” fee.
He added: “Quality and qualified advice isn’t free, but nor should it be priced at the expense of investors’ returns.”
Typically a flat fee model is thought to benefit those who invest large amounts of money and continually add to it while disadvantaging those who only have a small pool of assets.
Former technical specialist at the Financial Conduct Authority Rory Percival warned at a conference last year that charging all clients the same fee for a single service would not sit well with the City-watchdog as it was not “client-centric”.
He thought some clients would require a “significantly different” level of work than others and so to charge each the same amount would not be fair.