Our initial fees for portfolio advisory services are typically around 1.5% for an average client (based on an average investment of €1,000,000) but since we do not use Insurance company structures there is no insurance company levy to pay so you avoid a 1% tax payable on most other investments in Ireland making the effective cost payable around 0.5%.
We tend to work on the basis of a fixed fee for the preparation of a comprehensive financial plan which ranges from €2,000 plus VAT depending on the complexity of the plan.
A credit for the financial plan may be given against the implementation fees charged.
In a Financial Plan we cover an audit of existing General insurance (car, home, health insurance) and other policies (Life, PHI, Keyman etc)
We assess pension provision in terms of adequacy and structure which can extend to corporate restructuring if appropriate.
We assess net capital (assets minus liabilities) in the context of the client's financial goals (third level education for children, holiday homes etc) and the likely cash flows during the client's life.
We also comment on taxation issues and the optimisation of lifestyle cashflows from income and or other sources during the client's life.
Finally we comment on the provision or otherwise of Estate Planning (Wills, Enduring Powers of Attorney and more complex legal structures such as Trusts and Family Partnerships)
Part 2 - Implementation
A financial plan is pointless unless it is implemented.
For any contract we arrange, any third party commissions received belong to the client and are offset against fees. An often overlooked aspect of this is say with deposit accounts where we can be paid anything up to 0.35%pa from banks for introducing deposits.
For a client with a mix of cash and a portfolio this can have the effect of significantly reducing the ongoing management cost since the commission on the deposit is paid to the client's fee account.
Furthermore, when we arrange to rebroke existing life assurance polices for example we typically end up saving the client money through reduced premiums.
Our typical fees and expenses can be found on our website [broken link removed]
Part 3 - Expert team review
For our wealth management clients, part 3 of our process is a wider review of their overall financial arrangements by our external team of expert tax consultants, lawyers and other professionals.
This covers the areas of
Wealth Enhancement - Managing taxes on current and future tax events
Wealth Protection - Protecting your assets against being unjustly taken
Wealth Transfer - Estate Planning
Charitable Giving - Philanthropy is increasing significant for many clients in Ireland
Part 4 Review and rebalancing
I have written at length on askaboutmoney on the subject of the value an adviser brings to a client.
We can demonstrate two key benefits here:
1) The point made about the cost of investment in Ireland compared to the USA is well made. But the fact remains this isn't the USA. It isn't even close. By my reckoning having spent considerable time in both the UK and USA on a timeline Ireland, from the perspective of a retail financial services client, is about UK 1995 and USA 1985.
This is just my personal assessment based on my limited personal experience meeting several firms in the USA who manage many billions of dollars, working as a qualified financial consultant in the UK for 15 years and working as a qualified financial adviser in Ireland since 2008.
So what can I do for an Irish investor?
Well, I can offer clients portfolio administration services for as low as 0.05%pa with transactions costs at €30 per trade.
I can offer Executive Pensions from 0.35%pa with no administration costs and offer Institutional class investment funds with costs as low as 0.12%pa even for Emerging Markets. I think this goes some way to moving Ireland towards the international model.
But both of these products are just commodities and cost is all that really matters here.
The average investor still needs assistance with all this. For proof of this look at the questions asked everyday on Askaboutmoney.
These structural cost savings which we are able to deliver mean that we are able to charge a fair and transparent fee for service without the total cost increasing for the investor.
The value added part in the process is our working with a client to identify their goals and objectives, creating a portfolio which is matched to their attitude to risk, keeping them disciplined and in the markets when all the talking heads are trying to say that now is the time to sell and that they can help them avoid risk through some fancy market timing strategy. For the avoidance of doubt, I have never met anyone who can meet these claims reliably.
But to be clear, this is not a service for those who want to do this themselves and we do not provide an execution only service.
Our reasons for this are clear. I am yet to meet a DIY investor who has no emotions, who understands all the relevant taxation issues, who can work out all the cash-flows and who understands modern portfolio theory.
My final point on this is that our service is based on a consultative relationship with our clients. If they no longer see value in our service, they will simply go elsewhere and they are free to do so since we do not lock them into our portfolios.
The ongoing fee is therefore not built into the contract but rather it is a payment by the client for the ongoing advice provided - as it should be.
However, our existing clients have found that we add value greater than our ongoing fee and that is why we continue to expand both our business and service offering.
By way of an illustration of this, here is a trade confirmation I received for my own pension today:
Confirmation of Stock trade
Reference = 2533156A
Client = (IT303) Independent Trustee Co Ltd Re: Marc Westlake
Stock = (VANEMSI) Vanguard Emerging Markets Stock Index Fund
Currency = EUR
Type = Buy to Open
Quantity = 125.3136
Price = e119.6997
Gross = e15,000.00dr
Net = e15,030.00dr
Trade Date = 07 Jun 2011 07:06:00
Settlement Date = 07 Jun 2011
How many advisory firms operating in Ireland today are offering portfolios with Vanguard Emerging Markets Funds in amounts of €15,000? Not many is my guess.
The way we describe it is that we provide what the client needs rather than what they think they need.
For clarification we have two distinct services here which are being mixed up.
We offer a financial planning service which looks at financial goals and objectives, risk assessment of income replacement and life assurance, pension provision, financial management looking at budgeting and lifetime cash flows, tax planning, Investment planning, debt management, estate planning and philanthropy. The fee for this is independent of the fee charged for an investment portfolio. However, we typically offset financial planning fees against portfolio implementation fees.
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