In discussions about how to attract the next generation of clients, there is often focus on the viability of a business, as well as addressing the advice gap.
Indeed, it is not uncommon for clients to be at a stage where they are approaching retirement, if not already retired, or for a business to specify a minimum level of assets in the interests of profitability.
But rather than having large sums to invest, or complex pension planning to implement, it is more likely that younger clients are accumulating their wealth, getting on the property ladder or managing debts such as hefty student loans, notes Panoramic Wealth financial planner Ross Jefferies, who is responsible for looking after the firm’s younger clients.
“This in itself is closer to coaching,” says Jefferies. “So it may be that the model of charging for what funds are under management is, as one side of the debate argues, outdated. This is likely to lead to a subscription or retainer-based fee, which is potentially more aligned to the Netflix generation.”
Financial planning from £50 a month
One example of a financial planning service that is charging subscription-based fees is Future Plan.
The service, which was launched in April by New World Financial Group, began with an "intro" offering at £50 a month, targeting basic rate taxpayers with liquid assets of under £50,000.
With the stated aim of reducing the barriers to entry for financial planning, the group likens the charging model to a gym membership or entertainment subscription.
By July two further tiers to the subscription model followed, at a monthly cost of £65 and £80, again based on a client’s earnings up to £100,000 and liquid assets up to £200,000.
Future Plan’s pricing model:
£50 (£80 couple)
Basic rate taxpayers
Liquid assets: <£50,000
£65 (£100 couple)
Earnings £50,271 to £100,000
Liquid assets: <£50,000
£80 (£120 couple)
Earnings up to £100,000
Liquid assets: £50,000 to £200,000
For couples, the monthly cost reduces to the single person charge after 12 months. A reduced service is also available after 12 months, starting at £30 a month.
“While advisers continue to focus on charging by way of a percentage of assets, it keeps the focus on investment performance, it de-incentivises advisers from focusing on a bigger picture approach and it keeps the barriers to entry high,” says Sam Tate, director of strategy and growth at New World Financial Group.
“Those young people who haven’t yet had a chance to build up assets will continue to struggle to receive the early guidance they need and the advice gap will never be closed.”
A draw for wealthy clients too
Subscription-based approaches to fees have also attracted clients at the higher end of the wealth scale.
Another firm that has adopted this model is Fyfe Financial, which charges on a monthly basis that can range from £216 to £540 based on the complexity of a client’s circumstances.
Richard Fyfe, director and chartered financial planner, says his firm’s fees can be less competitive for people new to financial planning who tend to be at the start of wealth accumulation.
Fyfe Financial’s service tiers:
Monthly subscription fee
New clients are also charged a one-off fee to cover the additional work of onboarding.
“Assuming we’ve got our pricing and segmentation right, we’re now able to say that every client is profitable and no client is paying over the odds or subsidising another client,” says Fyfe.