Ongoing advice fees during a transition
During a transfer, each client's ongoing fee depends on paperwork, platform processes and a service agreement the client has seen. Each needs checking before the transfer.
During a transfer, each client's ongoing fee depends on paperwork, platform processes and a service agreement the client has seen. Each needs checking before the transfer.
The value of an advice firm sits in its ongoing advice fees. During a change of ownership or a change of adviser, those fees continue only if the paperwork behind them moves correctly. Each step below is administrative, and each one can stop a fee if it is missed.
For each client, write down where the ongoing fee comes from. On a platform, it is usually taken from the client's account under an instruction the client signed, and paid to your firm's agency on that platform. On some older products it is trail commission paid by the provider under the rules that applied before 2013. Some clients pay by invoice or direct debit.
Each route moves differently when the firm changes hands. A platform has its own process for changing the firm attached to a client's account. A provider paying legacy trail has its own rules on whether, and how, that payment can move to a new firm. An invoiced client needs a new agreement and new payment details.
Fees stop in a transition for three reasons. The agency change is not completed on a platform, so the fee keeps going to an account that is being closed, or stops altogether. The client's fee instruction names the old firm and the platform will not move it without a new one. Or a legacy product cannot be moved to the new firm, and the trail ends.
Each of those is fixable before the transfer. They are expensive to fix afterwards, when the person who knows the history has left and the client has to be asked for a signature months after being told nothing would change.
Consumer Duty asks whether the fee represents fair value for the service delivered. During a transition, two further questions arise. Does the client know what they are paying and what it buys? And has the client agreed to the firm that will provide the service from now on?
A client service agreement that the client has read and signed answers the first. The answer to the second depends on how the transfer is made: a sale of the company, a transfer of the business or a novation each handle client consent differently. Your compliance support and the buyer's should agree in writing which applies before anything is sent to clients.
A transition is a tempting moment to change the fee structure. Some buyers want every client on a single tariff. Making that change in the same letter that introduces a new firm asks the client to accept two things at once, and gives them a clear point at which to reconsider the whole relationship.
Under Securo, you keep advising the client through the programme, and the fee stays as it is unless you and the client decide otherwise. Any change to what a client pays should be made on its own, explained in a review meeting, and recorded on the file.
Clients taking an income from a pension or an investment need particular attention. Their fee is often taken from the same account that pays their income, and a mistake in moving the account can interrupt both. Before the transfer, record for each of these clients the income they take, the date it is paid and the account it comes from, and check after the transfer that the next payment arrives on time.
Their fee also reduces as the fund is drawn down. A buyer valuing the income will look at how long each drawdown fee is likely to last. Record the client's plan for withdrawals on the file so the buyer can see it.
At each review in the year before a transition, show the client what they paid in the last year, in pounds, and what the service covered. Ask whether the level of service still suits them. Record their answer. A client who has heard that explanation recently is less likely to question the fee when a letter about a new firm arrives.
Work through that list at least a year before a transfer. It protects the income you will be paid for at the exit.
A complaint about advice you gave can arrive years after you retire. Find out now which policy would answer it.
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Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.