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Why we no longer charge clients an implementation fee

Dennis Hall, CEO Yellowtail FP, explains why the firm has been moving away from charging an implementation fee

Yellowtail Financial Planning chief executive Dennis Hall says that over the past year the firm has been moving away from charging an implementation fee in favour of targeting and bringing on board the clients that hit the firm’s “sweet spot”.

“For the larger client, those with around £1m and upwards of assets, that we want to get on board as quickly as possible, we want to remove as many barriers as we possibly can, particularly where we know are in competition with the private banks,” Hall says.

“The lifetime value of a client with assets of over £1m is worth far more to us than any upfront fee we might charge and what we really don’t want to do is give them a reason not to try us out and to do business with us. The private banks don’t charge an implementation fee and if we are going up against them, which we are – we recently won a client with £1.5m of assets away from one of the major private banks – then we can’t be seen to have any barriers that might swing the client away from signing up.

“I think most advisers would agree that once the money is on board it tends to be fairly sticky because clients would prefer not to have the aggravation of finding a new adviser and moving all their assets again. Likewise, they want to know that they are signing up with the right firm and making the process as smooth as possible helps with that.”

Where Yellowtail will still charge a fee around implementation is if there are complex issues, such as pension transfer or consolidation of assets, which will require a good deal of work over and above the usual implementation process, Hall explains. “Then we will look at the work needed on a time cost basis and charge a fixed fee or an hourly rate. Likewise, if it is more of a transactional piece of work, where the assets are not going to stay with us, then we will charge a fee for the implementation work.”

Where the potential client has £1m of assets or more, the firm will undertake a cut down version of the financial plan often for free. “It demonstrates to them what we can do for them and we’ll do the ongoing financial planning in the term of the relationship. We charge 1% per annum on the first £1million of assets. That pays for a lot of work including in-depth financial planning going forward.”

Also, where a client may be a referral from an existing client, then the discretion is there to waive the fee for the financial plan, Hall says, which is up to £2,500. “The annual fee for a £1m client makes it sensible business practice for us to waive the fee and look to the long term.”

Competing with the private banks

Expanding on the firm’s win from the private bank – one of two clients that have been won recently – Hall says what is attracting people to Yellowtail is first that “the level of financial planning we offer is so much greater than they’ve had from the bank”, and also people’s dissatisfaction with the overall level of service. “Clients have said that the investment performance hasn’t been any good, they feel like the bank just wants to sell to them, and above all there is no strong relationship. The bank employees have no skin in the game and they move on after a while.”

What Yellowtail is offering, Hall says, is a better service for a similar price. “So we pitch first and foremost as a financial planning firm. We’ll do the cut down financial plan, where we’ll look at the big issues and decisions, along the lines of Dan Sullivan’s 80% rule, and once they become a client we’ll deal with the 20%. You don’t need an awful lot of data to make the big decisions. It’s the 20% where the more complex data gathering and analysis is undertaken, where we have to talk to their accountants and solicitors and where our time and knowledge and experience are brought to bear.

“And we’ll keep demonstrating to them and reminding them of the value they are getting out of financial planning and importantly, ensure they not only see what we’re doing but that they understand why we’re doing it too. We’re a lifestyle type firm and we don’t need huge numbers of large clients to make the firm profitable. What we do need is to win and keep them as clients.”

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