28 - We Need To Talk About Fees

In this latest pile of TRAP, the Trap Pack discuss

• Topical issues, including being present and putting our your work, DB transfer factory fines, the complete lack of understanding some peeps have about what it is we do (REAL financial advice)
• Meat and Potatoes: We Need To Talk About Fees
• Questions posted by our beloved TRAPists Jez Heal and Philip Dragoumis
• Culture Corner

Links referred to in the show:

• CW: The Man in the Arena https://youtu.be/A311CnTjfos?si=IQ9JrKPngQkpjp9T
• AS - apparent lack of understanding of lifetime financial planning https://x.com/paulclaireaux/status/1690241891009208320?s=46&t=sRHfdIQon2TfFJRFg7K23w
• AS - who says crime doesn’t pay! https://citywire.com/new-model-adviser/news/fca-fines-ifas-1-3m-over-seriously-flawed-db-transfer-advice/a2424881
• NL: Nice TRAP write-up on the Nucleus wrap website: https://illuminate.nucleusfinancial.com/blog/secrets-top-podcast-stubborn-buggers-decent-egos-loyal-audience?utm_content=262626143&utm_medium=social&utm_source=twitter&hss_channel=tw-107047128
• AS: TRAPist Tom Kenny referencing AbeBooks to access Nick Murray books: https://www.abebooks.com/  
• AH - following on from AS point - https://www.phynancial.co.uk/ 
• AH - Painkiller - White collar drug dealers - Netflix https://www.netflix.com/gb/title/81095069 - Dopesick 
• AS BBC Sounds- The Wolf of Crypto - https://www.bbc.co.uk/sounds/play/m001p6v6 
• NL A Long Time In Finance Podcast: The Nine Lives of Credit Suisse: Part One https://pca.st/yfirtyk0
• CW: Ben Carlson - A Wealth of Common Sense https://awealthofcommonsense.com/2023/09/the-60-40-portfolio-is-alive-well/

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Transcript

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Unknown: 0:09

Welcome to The Real advisor podcast, t r a p twerp. Please follow us and join in the conversation on Twitter at Pfizer podcast, where you can suggest ideas and themes you'd like the track team to discuss. Also remember to like and subscribe to our YouTube channel and leave a six out of five star review on iTunes. Doing all this really really helps us which means we can do more to help you. Now let's head over to the studio for the latest pilot trap.

Nick Lincoln: 0:43

Yes indeed, dear TRAPPIST, welcome back to what many people are calling episode 28 of the real advisor podcast to our AP trap my name as ever is Nick Lincoln and joining me as ever other three other Horsemen of the Apocalypse and the heart call the voice which are and Alan the storyteller Smith Now gentlemen, we have a show packed full of app salutely nothing so let's start unpacking straightaway. with yet more high energy review reads by my close personal friend the Right Honourable Mr. Andrew Hart.

Andy Hart: 1:12

Did you not leave the chime for the close personal friend anyway moving on. Couple of reviews today from good friends of ours and good friends of the show. First up is Don Spaulding. Entitled five stars excellent. I tend to dip in and out of podcasts when work on my bike schedule allows this one I keep coming back to genuinely interesting, always insightful and thought provoking. I don't always agree with the bond episode for example, but there's no point living in an echo chamber. Keep it up fellas DOM next up is Graham foster fossa who we know also very well part of our mastermind group fivestars wild on chaps putting a trap podcast together. It's very good and refreshing to hear good quality financial planners talk and share client experiences loved the Aum podcast all helps to enhance and deliver proper financial planning to clients and their families. Separate great to hear some contentious views around exams and individual planning items but always good to challenge the general noise that we have to deal with. Keep up the good work, fellas. PS I think Nick Andy and Alan Ireland have the best chance to win win the World Cup falls back to you boss I

Nick Lincoln: 2:19

think I think Graham who's a good egg we like Graham and Donna she took the really good eggs in our in our profession, I think yeah, yeah, I suppose your your that review would have come in a few weeks ago before England lost a Fiji and just played generally rubbish. So you're you're you're definitely out there running. So yeah. Okay, great stuff. Thank you so much. And if you want to leave a review, you know what to do. In the so called show notes. There's a link is dead easy. And also in the pinned tweet at the top of the advisor, podcast, Twitter feed or x v, whatever it's called today, whatever Elon wants to call it. Okay, let's, let's get this. Let's get this show a topical timestamp. So we can reference it when you listen back to it in years to come. Which of course you're all going to do not Mr. Weird ya voice The Man in the Arena.

Carl Widger: 3:04

Yes, indeed, the Man in the Arena. So this is a pretty famous speech from Teddy Roosevelt. So I've, in the shownotes, I've put in the link to a YouTube video of it, where there's a great narrator actually talks through the speech. But it's, it's really, really good. The reason I put it in and I thought about it was I spent some time last week with a bunch of very successful entrepreneurs and some successful sports people. And it's a kind of a quiet event that we put together with a few other people. And I just was minded after the few days of being surrounded by successful people in their chosen field, be it business or be at sport. And just the feeling of just listening to the stories like there is no story is straightforward. There is no success as straightforward. There's always failures along the way. But the feeling of goodwill towards each other the feeling of let's help each other. I just thought I was absolutely I'll be a little bit hungover coming away from this. I was definitely hugely inspired. And there was a lot of grouping emails going around, but also individual text flying around the following kind of couple of days, which was just really, really cool and definitely inspiring. And that was in sharp contrast to some comments I have, or feedback I have directly got myself recently. But But kind of more pointedly towards Mattis. I kind of let the personal ones slide. I don't really mind them, but I take the Metis ones personally, it's a bit mad, I know. But I just I just thought I'd mentioned it you know, be careful who you surround yourself with who you're inspired by who you listen to, who you're mentored by, I've got a really good group of people I think around me and they're the people who inspire me and look we are I'll have failures along the way, we all make mistakes along the way. That's okay. And that was the big thing that came out of it. So look, I just thought I'd mention it, and I thought it'd be worth talking about.

Alan Smith: 5:12

And I'll just come back on that there's nothing like, as you say, Nick, a topical timestamp, referencing a speech made about 100 years ago. But nevertheless, that speech, of course, is timeless. Myself and my good learned friend here, Mr. Andrew Hart know all about this, we had a bit of an exchange on this thing it was last year, maybe the year before when he was getting slaughtered online advice on someone or other. Some comments were being made about an article or thing that you'd written. And the and I pointed something out to you there is obviously that is that there's a, as you say, a well established speech. And if someone has, if you if anyone listening to this or watching this hasn't come across it, do seek it out. There's one in particular to a modern version, a lady by the name of Brene, brown, she talks about this, obviously, if you know her, she's a well established author, journalist, academic writer. And as she was getting some flack for some comments that she had made, and she just absolutely nails it, which we should put a link to her talk. Or her I think it's a TED talk in her speech, because she just says, Look, if you're up there in the cheap seats, or the edge, you're not on the in the arena, you know, covered in dirt and mud and shit and just fighting your way through. I ain't listening to you. I don't give a shit what you see from voicing your opinion from the cheap seats. That is a that's a brilliant articulation how Brene Brown says, Do you think

Carl Widger: 6:41

and actually in? I obviously didn't know you're going to talk about Brene Brown, but in the end of Teddy Roosevelt speech, he talks about daring greatly, and she isn't her famous so called daring greatly. All right, could I just read this piece of the speech out if you don't mind? Because this I just thought this was this, this put the Goosebumps golden, right. So the credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly who errs, who comes short again. And again. Like that's just part of it. But I just thought, yeah, look, as a business owner, it's not all plain sailing, it can be difficult. And it's just keep going, keep going. Keep going.

Andy Hart: 7:28

Yeah, final thing on this speech is amazing idea. As you print it out, and my office, it was on the sort of office back door. I did do a podcast on it, where I read the speech out myself. And also then the final section was Brene. Brown doing her thing about daring greatly. So yeah, if you want to check that out, it's on the Maven money. I think it's called Man in the Arena. It's amazing is amazing. Carl, thanks for bringing it up. Back to you, boss.

Nick Lincoln: 7:50

Very, very good. Very good way to start the show. Thank you for that car. Mr. Smith, and apparent lack of understanding of lifetime financial planning, surely not my friend?

Alan Smith: 8:00

Well, it would it would seem so and I think it's almost as if we plan or rehearse the show, which of course, is laughable, really, because following neatly on from your opening remarks, their call about the Man in the Arena, The Man in the Arena really being around people who are actually doing the work and failing big trying again, and trying again, versus those who are not doing the work, but they are highly critical of those doing the work. I'm not, for obvious reasons, going to name names, but it wouldn't take too much digging around to find to find out about this stuff. It's my following on social media, Twitter, in particular, in particular grows, I get more and more, you know, pushback negativity, I post, you know, comments. And you can guarantee almost every comment that I post or write about, I'll get a handful of people saying you're wrong, that's stupid, you haven't thought this through whatever. I've got a couple of points to make on that one. It's just an opinion, guys. It's just Twitter. It's not an academic research report or anything. It's just an opinion. And we're all entitled to our opinions, as we'll talk about later on in the show. But one thing that really stood out for me was a recent comment. You know, some of the stuff I say is, but it's boring, it's repetitive. It's the same old story. And a lot of the messages we the four of us often repeat and talk about on this show and in other places. And it's the concept of that investing is a multi decade strategy, you're generally investing, we sort of default to seeing 30 years. And one of the reasons we say 30 years is that somebody retiring around 60 or early 60s, there's a very high significant chance that at least one of that two person couple will still be alive 30 years later in the 90s statistic statistically proven fact. And in fact, beyond that, if you are quite elderly, you're probably thinking about the next generation. You're thinking about your children, your grandchildren, maybe a foundation or a chair If you want to support, so you should always be thinking long term. So I posted something saying, you know, 30 year time horizons. And I get attacked for that saying, no one's investing for 30 years Allen? No, you know, most other people need access to their income before 30 years. Most people, people who are in retirement needs to spend their money during retirement. And I'm thinking, No shit, Sherlock. That is what proper financial planning is you're identifying the liquidity needs, you're identifying, who needs to spend what and when over a meaningful time period, you're building in comfort factors, you're building in buffer savings amounts for unexpected emergencies and so on. That is what this whole damn thing is all about. This is the essence of real financial planning. And to get a message back from somebody who I think the point is, they just didn't understand the very essence of what it is that we do. And so I'm always on a hiding to nothing if I say something, and I'm speaking to somebody on audience who basically misunderstands the fundamentals. And I'm not being personal about it. I mean, I've done you know, this is my profession, this is what I do for a living, of course, I understand it. But people who are standing on the outside people who are not in the arena, who are throwing stones at me, and you guys and others, telling me things which are just fundamentally wrong, I'm sorry, but I'm going to call them out. As I say, I'm not mentioning names, it's not appropriate. But if you're not, if you're not actually practicing this stuff, if you're not actually doing this stuff day to day, that I would encourage you to learn more about the actual profession and the day job that we all show up every day and do our best to deliver chairman.

Nick Lincoln: 11:36

Very, very good. And that that is a nice segue from Carl's point. Absolutely. And I'll just maybe close on this unless anyone else wants to add anything. I don't think we sometimes understand how ignorant people are, some people are of what we do, we kind of because we're immersed in this world. And we do it all the time, right. And we're totally focused on delivering great financial planning and good client outcomes. And we kind of assume everyone else says even people who don't do what we do, but comment on what we do. But the ignorance is, is surprisingly deep, Mr. Hart, your digit was raised, I believe, yeah,

Andy Hart: 12:07

if we take a just a typical client example, let's say client, couple of 65, retired 15 years ago, in 2008, and they had x hundreds of 1000s of pounds, for their retirement years, they're halfway into that journey now, haven't spent all of their money, you know, they would have obviously, taken a little bit out, you know, life would have happened, things would have changed, and they would have been halfway on that journey, they wouldn't have spent that money out, you know, down to zero. You know, hopefully, the idea is it would be more than when they started, you know, obviously, purchasing power, power being the key thing. And obviously, if you just extrapolate that out for hundreds and 1000s of couples that retirement all the time, then obviously, that's, that's how it works. We always we obviously know that short term cash flow needs are baked in, if you need x in six months, you need y in three years. And that, again, can be factored into it. So I don't understand why you can't see real life client journeys and sort of attach that to, to, you know, his or her comments. Back to you, Nick.

Nick Lincoln: 13:38

Yep, well said, Andy. Okay. Another story from Mr. Smith, who says crime doesn't pay out. And this is a city wire article. And by the way, there are links to all that most of what we talked about everything we talked about today, there'll be links to it in the so called shownotes.

Alan Smith: 13:49

It's just, this is a topical timestamp. I saw this I do browse the trade press once a week and see the the headlines that come up and I saw this and you can't let your heart sinks, doesn't it? When you see one of these stories, this was a company which was effectively a defined benefit pension transfer factory effectively. The Push through 400 Sorry, no. 1000 is over 1000 DB pension transfers for combined. Ouch. Yeah, it was painful. For the combined assets value was over 392 million. So the thick end of 400 million of assets in the course of I think it was two years, a very short time period. When you break down and there's only two, there's two advisors in this company that were doing about five a week or something of these things. There was a there was almost none, which they said no, this is not appropriate to do a transfer. So but absolutely shoving these things through a hell of a piece. And of course, it ends up being getting some complaints getting some, you know, getting the ombudsman involved getting the FSCS. Of course, the company gets closed down, but so on 400 million of value and transfer values. I mean, I mean, even if he took 1% And I'm assuming it took a lot more than 1%. You know, that's 4 million if you took 3% Which is probably more likely. That's about 12 million pounds of fee slash commission over a very short period of time across two advisors. So they get rumbled. FCA comes in tells them you know just pulls them apart of everything they've been doing has been wrong, and they get fined But 600 grand each. And there's an ongoing debate about the affordability they might not be able to afford the fines so they're negotiating with the regulator about paying a lower fine. These guys have made millions they have made millions from this there is no doubt about it, you employ some sort of kind of auditor to track through the money where it's coming in worse than they have there's no way that they haven't earned you know, 400 million over a short period of time with DB pension transfers. And that was that you know, that's the sort of the headline of the question Who says crime doesn't pay you know, go out there just you know, get your basic level qualifications, do a ton of this type of work get closed down in the end by which time you bank the money you've probably got it invested in offshore or whatever else, except the fine move on it's a pretty sad tale really, and reflects badly on our entire sector.

Nick Lincoln: 16:16

That's, that's appalling. I just looked up the name of the firm I don't recognize not all the two directors name but that's you're right, you're you're right in the maths, but I don't know how they work out the fines because maybe the fines are based it's no point finding someone like 10 million quid they haven't got it. I suppose. They would have made an absolute fortune from there, whether it was one but especially you know, and ongoing, you know, the ongoing which we'll come on to other with the meat potatoes again, it's quite a quite a topical story for me there. Mr. Smith. Shall I move on to the next topical tip fit? I've got something hovering over that. Okay. Mr. Smith, again, you just want to tell the dear Trappists, our beloved audience, there are some important dates coming up, including some very good conferences and including perhaps the best conference October in the

Alan Smith: 17:02

we're now in what would traditionally be kind of conference season, aren't we? We know after the summer holidays, we kind of get warmed up and it's generally a lot of conferences going on through September, October, even November. The day this podcast comes out I will be attending and actually doing a little speaking part at the world famous progressive planners conference run by our friends, Lee Robertson and his colleagues at Octo. So if you're listening to this on your way traveling in to that conference on the 14th of September, do reach out come and say hi to me if you're a beloved TRAPPIST, love to have her have a chat and catch up with you. A few days later, myself and my learned colleague, Mr. Hart will be traveling to the southern hemisphere to go to Cape Town for humans under management, South Africa. That's 19th I believe and right yep, yep. Tuesday, the moment I'm speaking at that event, as well as we both are obviously good at good audience go to the

Andy Hart: 18:01

international keynote for that one. Is that you told me to say that now.

Alan Smith: 18:06

Yeah, you made me You made me come on last which is going to ruin my entire days.

Nick Lincoln: 18:13

Okay, wait around all day. It does ruin your entire day.

Alan Smith: 18:17

Can I? Can I change my profile on LinkedIn to see international keynote speaker? Yeah, definitely. We

Andy Hart: 18:23

do. Definitely.

Alan Smith: 18:25

I've got an events which has to do with the other award winning podcast bulletproof entrepreneur relaunching this month in September as well got a live event at Homegrown the Private Member's club although on this occasion it will be open to all comers on the 17th of October where I'll be speaking with Piers Lynnie X Dragon's Den close personal friend of mine and we'll be unpacking the magic of AI and artificial intelligence as it relates to as it relates to business owners and aspiring entrepreneurs and last for now on the the next day actually on the 18th of October I should also be doing something at the money marketing interactive in central London which I understand is a free conference run by money marketing lots of interesting speakers

Unknown: 19:27

I'm sure that

Alan Smith: 19:28

that takes a while and that's it so that those are dates for your diary there's four dates for your diary and and if you want you might as well whilst you're here chuck in your although it's it is a complete sellout but if someone wants to be doing live streaming for him London in November

Andy Hart: 19:41

yes I'm London is on the ninth of November. Yeah, I'm sold out like well over sold out. But yeah, there is still an opportunity to get some get the live stream tickets. So thanks for that, mate. Yep. Yeah, full on in Figure conference organizing at the moment seeing

Carl Widger: 19:54

as we're on events that are coming up at the future you events that I spoke about before is on next week. So hopefully I'll fill you in a little bit at the at the next episode. Believe it or not, we're sold out. So for us to be sold out. And to be the app capacity and not accept any more bookings is pretty bloody amazing. So well done to Team matters, and especially Susan Walsh, who's putting all of that together. So I can't wait to share some of the insights from that on the net. First episode

Alan Smith: 20:30

that's really good call nice. I mean, that's that's not a it's not an easy sale. I don't think the way it's described and your chart, you know, it's not it's not cheap either. So to sell out, that's great. That's presumably gonna be an annual event now for you guys. Thanks. I mean, I think it's great. Yeah, we'll see

Carl Widger: 20:47

some amount of organizing because behind all of this so we'll see but anyway, looking forward to read.

Nick Lincoln: 20:53

Oh, yeah, that's that's a real feather in your bone make those and exclusivity and then same q&a as well. Of course with hum, wow, selling out, you know, paid for events which are not, not inexpensive relative to, in quotes, free events. Well, of course, you are the product. Okie dokie. So talking about the Man in the Arena and just showing up and doing your work, I was asked by nucleus, nucleus wrap to write a piece for them on trap and our first pretty much the first four months of trap and how we got to where we are, are we happy with what we've done? What do you think with this? What's the secret sauce that's enabled us to be? I think a success. I'm not being big headed about it, I think to have nearly 60,000 downloads of a podcast that comes out every other week. And is very, very niche and get such lovely feedback from our beloved TRAPPIST I think it is a success. I think we all think that so I wrote a piece via faith Liversidge for nucleus rapid song, there's a link to it in the so called show notes. And that was nice to be asked, and hopefully that'll get a few more people listening to the show. So that was all good. But again, the main point in that really is I think, Alan made a reference maybe two or three episodes ago about how many podcasts don't get beyond episode X. And a lot of success in life is just turning up 90 I think 95% of success is turning up just turn up and do your job. And that's the we're just stubborn buggers, aren't we and we just know we're gonna do this and we do it come hell or high water whether you're skiing in the Alps Island or I'm stranded in some, you know, converted brothel in Sicily. You know, we, we get on with the it was in the process of being converted quickly. Yeah, so that's, that's nice. Anyway, the links in that so, right now, Mr. Smith again. Yeah, we had to one of our Trappists Tom Kenny, and perhaps a new way to get Mr. Murray's books at prices that aren't on a lake variety.

Alan Smith: 22:39

Yeah, shout out to loyal TRAPPIST, Tom Kenny, who I believe works up at a great firm boost financial planning after I think the last episode and I referenced one of Nick Murray's books and it's part of my culture corner reference and made the point that we all know it's it's like trying to find hen's teeth or whatever the saying is trying to get hold of Nick Murray books without having to remortgage your house in order to get one now Tom reached out to me via LinkedIn and referenced a company or an online place you can buy them it's called AB e books. I think it's just ape books.com And yeah, you go online there but I think we've all had a look at it it's quite a mixed bag yes there are Nick Murray books for like five 600 pounds there as well secondhand but there are some for five and $6 obviously you got to pay your transport postage fees which probably the same again, if not more, but you can get hold of seems to be quite a wide range of Nick Murray boots accessible for reasonable costs. So thank you, Tom. That's what this network is all about. That's what the community is all about me find things that are interesting for us and others have got ideas or insights that can be shared with a wider audience audience then obviously let us know and we'll share them on this podcast. So again, thanks Tom.

Andy Hart: 24:42

And good heart very similar on that there is another website that is UK based run by David Hearn that sells the books. Annoyingly I believe he's sort of all out of the books at the moment. So it's not a very useful recommendation, but I believe he's going to get some more chips across but it's called finance.

Alan Smith: 24:59

Ai. Are you sure? Are you sure? I

Andy Hart: 25:01

thought yeah,

Alan Smith: 25:02

I'm arguing it for now. He's gonna He's gonna reopen the shop. Is he okay? All

Andy Hart: 25:05

right. Okay, I don't know All right, whatever. There's a link in the show notes called financial spelled F haitch y NANCPHYNAN c i a l.

Alan Smith: 25:20

path. So apart from having the wrong spelling, the fact that the shops closed down and you can't get access to the books. That's brilliant. Amazing. Let's move on. Yeah, the websites

Andy Hart: 25:27

crashed as well. So the triple

Nick Lincoln: 25:31

nine other websites maybe it has been shuttered them for them anyway. David Hearn let's stick to a books for the time that was a resource maybe maybe it's a brilliant resource. And again, David Herman one of the one of the good guys in our in our mighty profession as Mr. Hart labels it quite correctly. Okay. I think we've given topical titbits a damn good thrashing let's let's move on to the meat and potatoes and this could go a variety of ways we could all by the end be sworn enemies of each other. I don't think we're going to be sworn enemies of each other. But the great feat if there's active versus passive, maybe St. James is placed. Bad, everyone else good. And then the fee debate. I think those are the three things that get people's juices flowing. So we're going to talk about the great fee debate. Obviously we've come a long way as a professional since RDR. Some of us were fee based. We For RDR, but it's not just about being fee based. It's how you charge your fees and how you communicate your fees. And we're gonna lead off with, with Mr. Smith, who, for once has an opinion or two?

Alan Smith: 26:27

I do. I do indeed. And you're absolutely right you want to talk about is it's about time, we put this on the agenda as a meat and potatoes talk about fee structures and feeder beats. And before I sort of expand on this, let me just say, I've got, obviously, we've all got our opinions, and I've got our views. I don't for a second, supposed to tell other financial planners or any other business owners how to run their business, how to charge within their own organizations, you do whatever works for you. It has become known that we've taken a different route. And I can tell you that I'll share the background to it. And it's working for us. I'm here to share some of my journey, some of our experiences. But not to say that my way is better than everyone else's way is here for an open discussion, an open debate. So let me take you back in time, some years ago, seven years ago.

Unknown: 27:18

Grab yourself a drink, a very long drink. It's story time with Ellen Smith.

Alan Smith: 27:29

You thank you the origin story of this. In fact, I can go back to the beginning of when we started in business. So when pretty much every aspect of the business, which is capital, asset management has evolved and has changed over the years when we got started. Our investment proposition was largely an active management investing investment proposition, we did little or nothing in the way of what are called traditional financial planning and cash flow modeling. Because I don't think those tools really existed. We didn't really understand it never heard of the like the likes, you know, conversations like behavioral coaching, behavioral finance, and all that sort of stuff. So we're very traditional IFA, every one of those aspects has changed. It has evolved, as we've learned, I've got a bunch of really smart, thoughtful colleagues here, most of whom have been with me for many, many years. And we are forever challenging the status quo. We're forever looking at how we do things, and wondering and asking ourselves, Are there better ways of doing things and every one of those, as I say, from investment to financial planning to behavioral coaching, every one of those we've evolved and changed. And I think what we offer now is significantly better than what we offered, you know, 1015 years ago. There's was one aspect that hadn't changed until a few years ago. And that is the structure and the way that we charge professional fees for our services. As we know, this industry was was born and brought up on a percentage of assets or AUM model, we go back, I'm old enough to know that when you when we're used to recommend products, and and unit trusts and things, the manufacturer of the product were the ones who dictated how you got paid. And they all they generally defaulted to a percentage of assets basis, and they told you how much they'd pay. And so that was that became the default approach, then, retail distribution review came along in 2012. And traditional Commission's and having product providers manufacturers tell you what you're going to get paid that went out of the window, and it moved across to a fee and a put fee in inverted commas. basis in as much as you are now as the advisor, you had the ability to agree your fee with the client. And yes, you can still collect it from the investment accounts. But it's up to you and not a third party, not the product provider to tell you. But a lot of the evidence would would point to the fact almost everyone just carried on charging the same way as they were charging before. And the traditional 3% initial commission became 3% initial fee, the ongoing half percent, trail commission became traditionally 1% ongoing trail fee. And so there wasn't much change. So seven coming off or seven years ago, it's part of our continual process to review and analyze, and kind of challenged the way that we think and our company myself and colleagues got together we had an ad and off site. And we kicked this around for the best part of a day working out what the best way was to charge for professional services. Because what we had realized by this point, I don't think this is really up for dispute, is the vast majority of the value that we deliver to clients was in the planning. It wasn't the investment management, I was standby. And so our investment proposition is world class is up there with the best that I've ever seen out there. But it's not the be all and end all it's not where our real true value is. So therefore we were we were we were challenging ourselves if that is the case, if our real value is in thoughtful planning, structuring project management, ongoing coaching all that stuff. Why on earth are we tying our professional fee structure to the value of the clients retail investment products they have managed by us? There's a disconnect. There's a massive disconnect. There was there was four four key points before we distilled it down to four key headings which were cross subsidy. The larger clients pay it just disparate notional amount of fees compared to the smaller clients, therefore, it's a cross subsidy that exists for clients got a million pounds of assets. Theoretically, he's paying 10 times more than the client with 100,000 pounds of assets, albeit that can be discounted based on size. There's also the contingent nature in order for you to get paid anything, the client has to invest money with you. Whereas sometimes the best advice is to pay down debt is to help your children is to is to do something else, not necessarily invest more money. There's also the cost, the compounding effect of cost, a percentage of assets model, which increases in line with long term market returns is costly, or we talked before about having multi decade investment programs, paying 1% a year for 30 years is actually pretty costly when you look at the compounding effect. And last but not least a conflict of interest that exists, there is an there's an inherent conflict of interest, if the only way I can get paid is by taking a percentage of the investment funds that you give to me. I mean, I would say most, the vast majority of financial advisors are good, honest and ethical. And they wouldn't be influenced by this. But the client thinks for a second that your advice is likely to be conflicted. That's an issue. And the last point I'm going to say is there's two huge markets that you're missing out on charging a percentage of assets basis. One is younger, younger people who've got little or no assets, but they're sort of fast moving sort of career oriented, young professionals or business owners. And the other one is the entire the business owner market itself. We all say that, you know, clients who are business owners to own a limited company, husbands a wife, or whatever, the great ideal prospects for us to work with, the majority of them got most of their wealth tied up in the value of their business and maybe their property. So we're missing out if we if we're charged, still charging percentage of assets, pieces that we're potentially missing out on a huge market. So nearly seven years ago, we pretty much overnight change. And we moved our fee structure from a percentage of assets basis to effectively a retainer, or subscription, a monthly paid subscription model, which is predicated on value. There's a number of other factors beat based into it. But effectively, it's a value based subscription model, which we think works really well. And We have certainly picked up a number of very great clients because they prefer this model to what they perceive as being a rather more conflicted model than the rest of the sector chooses. That gentleman, is enough for me for the time being, I will put my hard hat on and standby for your comments. And uh, you're going to, I think leadoff case for the defense. Go on.

Andy Hart: 34:00

That was brilliant. Alan, you brought up loads of really useful points. Thanks for that. We could talk about this all day. So we're going to try and just chip in and say a few points. The bulk of financial advisors still charge on an AUM basis. I'm not saying that's right or wrong, we can come back to that in a minute. I do know a lot of advisors that have been diehard and very vocal about subscription charging, and then have backtracked over the years. There's a very famous company that is the name of tuna fish, who was very vocal about this. And there's a few other people that we know as well. You know, Aum fee charging is the worst form of client charging, except for all the others, in my opinion. Also, I'm six years into running Maven advisor. I'm on version 23 of my fee, client agreement, which is also quite interesting. I think this debate as well, sometimes tries to focus on it, you know, the misconception is the charging structure is where the integrity is. Whereas I don't think that's the case. I think the integrity is with the firm and the advisor. You know, I could show you a subscription charging crook, you know, in an AUM financial planning, God, yeah, as such. So it's the person in the integrity, I do get the conflict of interest. It's an allocation of capital question. If I've got a client that says, I've got 100,000 pounds, do I pay my mortgage off by holiday home in Spain? If I have low integrity, I will say, Oh, no, of course not. That'd be a ridiculous thing to do with your money, you should definitely add this to your investment portfolio with me then therefore, my greedy fee increases. Whereas, as you say, it's the integrity of the person not you know, the the fee charging structure. There's a couple of pros for the Aum model, you know, it's seamless, it's quite easy to understand. It's all taken, you know, you do you are sort of in this together, you know, the more wealth I look after you and the more wealth I grow in a controlled way, you know, my fee will be commensurate for that. And obviously, if there's the declines in the market that are outside of our control, again, I'll take a hit on the fee. There's lots and lots and lots of things to discuss about this. Also a lot of these subs scription fees they are, in my opinion, they are disguised aum. So for example, if let's say I have a client where I say I'm going to charge you 25 grand, you've got a few quid, you're worth 10 million pounds, I'm looking after 3 million. If I equate that to an AUM fee amount that works out to be 0.83%. So yeah, there's, there's a couple of the final thing I'm going to talk about is, you as financial advisors, you need to be really aware of the difference between your advice versus DIY. So over the years, I've decided to call this the no help version. So never call it DIY. Say, you've got an option, you've got two options, you've got used to call it DIY, don't call it dry. So you've got two options. Now you've got the no help option over there, where you get no help do it all yourself. Or you can come with me, and I'm called the help option. So it's not fee paying advice, option versus DIY. It's the no help versus the help. The help option is obviously both charging structures, subscription fees, and aum. But yeah, just a point to sort of shoehorn in there, who's next over to your car.

Carl Widger: 37:22

I would encourage everybody to watch this one on YouTube, because we got a big lecture about musing our mics before today's episode. So you can't hear us giggling in the background. Because as Andy was talking Arlen was shaking his head, obviously, God, no, that's not the case. So you're gonna you're gonna miss out on the body language? And sorry, that you missed out on on the on the giggling? Yeah, look, I, the first thing I would say is I am extremely interested and remain extremely interested in Ireland's fee structure. And Ireland will tell you I have sat with Ireland for literally hours on end trying to explore this, right. So where I suppose I'm coming from the Irish model is still way back where you guys have come from. So there's still high upfront commissions, high initial commissions, big three, four or 5%, initial fees, and all that kind of stuff. So where we've evolved to is a million miles away from that, but we are on the Aum model. For me, there's loads of reasons I will never ever rule out, changing the structures, I think Andy's point is really well made that he's on version 23, or something like that, you know, this is something that you got to be keeping an eye out. And I'm all ears all of the time. However, for now, where we've landed is the Aum model. I find it It's simple. It's easy for us to kind of explain to clients. So for us, especially for the platform business, it's the platform fee, the Metis fee, and then the fund manager fee, there you go. And we've kind of a rule that at every single review meeting, you remind the client again, this is these are the fees, and these are the split outs, so that everybody knows what everybody's getting paid. So I have a famous phrase here, there are no gray areas, when you do your business with Mattis, you know exactly what it is, it's up to you to decide whether that's value or not. For me, and I don't know if the tax rules are different. It would be as it stands now, then I have spoken to him about this. But as it stands, it will be tax inefficient just to charge a fee from the point of view of VAT being applied to fees. And also from the point of view of it being tax efficient to dock fees directly from pensions on the Aum basis.

Andy Hart: 39:44

Just to quickly jump in there. I think I'm right in saying this, Alan, isn't it? The VAT? And the tax is a net net for both models in the in the UK

Alan Smith: 39:54

is exactly the same.

Andy Hart: 39:57

The Irish tax Yeah. I'm just saying to you guy. Yeah, from a VAT tax point of view. So net net cash back to you, my friend.

Carl Widger: 40:06

So that wouldn't be the case in Ireland, for people who are not paying fees via business. Anyway, that's probably a moot point, because that's the kind of technicality right, so let's not talk about technicalities, they're so Ultra transparent is what I'd say. And we're like over the top on the transparency, we've had people join our business going, I think we potentially are losing business here at Metis. Because we're being transparent where others aren't. And I'm like that's D that isn't made, that's a non negotiable. We are just that's part of the integrity piece here. So just in terms of addressing a couple of points that you made, and I was writing something down when you made one of them. So I think there was kind of four key points and I've kind of so I suppose the reason I'm gonna say this is to just assure everybody that I've thought this one through so and allowing myself changing my mind on this too. Okay. In terms of the cross subsidy, it's a very, it's a very well made point, and it's a fair point. So how we limit that are limited is probably a good point is we put in a tiered structure so to pay Anything on the Aum fee does come down quite significantly. The product dependent piece does two kinds of points I would I would make on that it's it's, you know, well, you know, you have people have to do product in order for you to be paid. So we do charge for the plans, but not all the time. Okay, straight up. So if we feel that this is a really good client for us, we will we will actually say we'll waive it. Or we might say, here's the fee. And if you do business, we will waive the fee, because it'll be part of the Aum fee. So like we do have lots of instances, no, that's not true. We have instances whereby we have just charged for plan and done no business, I do have tons of instances where we have told people who came to us with a ball of money, so no one to invest. And then we did a plan and found out their debt. And the debt was rising and rising in terms of costs, because interest rates are rising with lots of loads of cases where we can show no, we told the client to go and pay off the debt, and come back to us when things when things change around the conflict of interest. I'm not really sure about that when I learned. But I think that one, I'll take that one away and kind of think about that a little bit more. Because after all, when people kind of walk through our door, I would expect the understand that what they're going to ultimately get is a financial plan that may derive some financial products. So I'm not sure if the Aum model kind of expressly gives a conflict of interest, where I where I did feel there was a conflict of interest was. And it's not to say that we don't do business with insurers. But when you have an insurer who won't break out the actual product cost, so the pension cost, and then the fund cost because they're also the fund manager that can lead to a conflict of interest. And indeed, if they're if they're paying people initial commissions, well, there you go, they're kind of you've got the I don't want to name names, because I got in trouble for that before. So if you had x y Zed pension Company Limited, and you've got the X Y Zed personal pension in the x y Zed managed fund and your the broker, financial advisor is being paid a big upfront initial commission from x y Zed pension Company Limited this conflicts of interest all over the place there. So look, in summary, I think your points are well made, I think it's a good debate. It's certainly something that is on my agenda literally all of the time. And and Alan you did forget and all your events, forget to say that you are coming over to talk to the Metis team in September. And that will most definitely be part of the discussions that we will we will be having at that time. But I to my final final point. And his point is, is really well made that look, as long as you can, you know, act with integrity, do the best for your clients and be transparent about it. I think then you know it. I won't say doesn't matter what model you're on, but it matters less what model you're you're how you're charging your clients.

Alan Smith: 44:24

Okay, great. Mr. Chairman, let me just come back on that before you jump in with your your views, if I if I may. Again, all we're having great, this is violent agreement here, we're all agreeing with each other. And I think that's, that's, that's perfectly reasonable to be able to do. But just coming back on a couple of points. The fact that, of course, as I said, the vast majority of advisors are honest and ethical we are particularly in the UK, Ireland as well. And around the world, we have got a regulatory environment which discourages sharp practice. And most not most, not all the cowboys are out. But in the same way, as we've said before, you know, we believe in well, we don't believe in active management as a sort of core investment proposition. But I'd rather be with some active managers, then some passive advisors. But I'm just trying to get the sort of best of all worlds, I'm assuming your ethical, I'm assuming you're you've got a thoughtful investment proposition, I'm sure you do real financial planning all the time to every client. And I'm also therefore seeing my version of, of ideal and perfect kind of client value proposition has a fee structure which is more modern and more relevant, and supports the view that most of the value is elsewhere other than the assets and asset management. And I have to say, this wasn't just me and my colleagues thinking about this, we were getting pushed out. We've got a lot of really smart entrepreneurial clients. And I remember speaking to a few of them, who just saw businesses, and I was doing my assets under management fee pitch to them. And they were saying, Alan, honestly, your fee model is nuts. I don't really care about this investment thing. This planning stuff that you've done for me and my wife is amazing. Love it, I'd pay your big fee for that. I don't care about the other stuff. So we were very influenced over the years by having clients who push back and really encouraged us to evolve our fee model. But it's a couple of quick points. Just because you listen to this. The default answer is it's just easier clients prefer it we prefer and it is death. funnily easier, but so is offering an active investment management proposition. If I taught all our clients we know we, you know, we review the markets we buy and sell well, there's a lot of our clients would quite like it, it's kind of easier proposition. Just because it's easy doesn't mean you should always do it is number one, number two, or on an assets, you know, we're all business owners here, if you were to really consider the fact that you've got little or no control over your future revenues, and it's your future revenues. And therefore your profits are predicated by global events of over which you've got zero control up and down. That doesn't sound like a sound business model, you know, your revenue, our revenue, well, anyone who has an assets based fee model could literally fall 1015 20% 30% In the course of a year. And that's going to wipe out for most advisors, that's pretty much all their profit, they're now making a loss for a period of time. And I used to saying, well, or bank the bank this sort of money in the good days and will sort of bring it out in the bad days. I don't think it's a sound business proposition, if I was going to invest in a business over which they had got zero control of their future cash flows and revenues, I will be questioning that as a business model zeros a bit stronger. What influence do you have over the global capital markets, which are actually which determined your purpose your revenues and your business are here,

Andy Hart: 47:36

we don't have any I mean, it could be a bomb could go somewhere this afternoon, I'm not market your income will fall, I'm not saying that we have any influence, I'm saying the historical data, you know, goes back centuries. So we've got some insight of where we're going to move, we just don't know exactly which direction. But yeah,

Carl Widger: 47:56

that would be would be, well, if we're asking our clients all the time to look to the long term, then we should also be prepared to look to the long term, and I suppose that was our big move towards the, you know, towards the trail model, the lower initial phase, and all of that kind of stuff. So therefore, we're going to take the rough with the smooth over a long period of time, I'm comfortable that that will smooth itself out. Okay. And also our, also our, our ambitions are aligned, so I'm feeling the pain with the clients. And you know, when things are going well, then, you know, everybody is happy. And just a final point of that if we have clients who kind of invest on one of our lower tiers and move through more than, you know, we will and we have done and we will continue to reduce their fees as we go. So

Alan Smith: 48:45

it seems to me seems odd to me that you're the value that you deliver to the clients and the work and the time probably during periods of market stress and tension when Mark capital market values fall will increase and get your revenues will fall now, I don't know I know nothing about your kind of your your business and your p&l and your sort of forecast and stuff. But there's plenty of businesses that if they had, which has happened many times in the past sustained periods, I'm talking 578 years of low or zero market returns, or negative period periods of negative return, you're gonna have to and this has happened before, I'm aware of various companies that start making redundancies to start after laying off lay off staff, which is not ideal from if you if you're hiring people. If your income, your business income fell 30% and stayed low for two or three years. Let's let's say someone's gonna have to take the halo tear from

Andy Hart: 49:37

the Wofford wise one over to you, Chairman.

Nick Lincoln: 49:41

We'll call just just if you have gone somewhere to say my friend you normally do.

Carl Widger: 49:46

Yeah, I think saying that we're gonna have five to seven years of zero return, right? That what that hurts matters, Ireland 100%. However, if Metis, Ireland was 100% fee based, and we had five to seven years of zero return, that would also hurt us because we have difficulty number one collecting fees. And number two, I'm not sure the business would come in as its had done. So I don't think it's to say that one model is, you know, going to be totally sheltered from that kind of environment. I think that that model, any every model would struggle, if if that happened, we spoke in the last episode about having a few difficult conversations with clients because we've had no growth for 18 months. But like has, you know, we will man up and we'll talk about it. And final point is, you know, do we have loads more work to do. When did we have loads more work to do when Russia invaded Ukraine and markets took a bit of a hiccup? Nope. Because we do all of that really hard work and training with our clients along the way in the good times.

Nick Lincoln: 50:57

Okay, that's great. Okay, well, I've made some I've made some notes there and I just want to let me Can I just frame this my how I see things I don't really give a damn how you get paid as long as you get paid for the work you do. And as long as the customer knows what they're paying, I don't give a monkey's really the end of the day. This is what we charge for This is what you get no hidden fees. And when we had a trapeze question coming in yesterday, which we will get to eventually in a future episode, not a financial adviser Joe Public, who is struggling to get details of the actual fees he is paying on his portfolio from his IFA firm. So there definitely are Ira firms out there and some more vertical firms that are somewhat opaque in their charging structure. Okay, well, we're not like that. Okay, it's kind of a given. So putting that to one side, I don't give a damn as long as if the main thing for me is transparency that so let's get that out of the way. Alan, you've got no control over inflation, my friend. And I mean, I'm assuming your fixed fees are going up by 16%. Otherwise, your bottom line is going down. So we none of us have a controller but pretty much anything. And that's just that's just life. I do think you can charge more for clients with more with bigger portfolios, God forbid, because if your value proposition is behavior modification, which ours is and sticking to the plan, stopping those people making really stupid mistakes and also lifetime allowance, annual allowance, the yes, that's bigger ticket stuff, you're and you know, as as Andy says, we're answering expensive questions and people with more money, not a judgment call. It's just a fact people with more money have more expensive questions that need answering because if they get the wrong answer, they're screwed. So I do not have a problem with charging more people with more money and more complex situations. This old cannot about well, if you're charging a fee of 1% a year it comes out of their returns and over 30 years, it affects the investment performance, if you've got a million quid to invest and your annual fee is 1%, that's 10,000 pounds. In a flat fee modeling only got 990,000 pounds to invest because 10,000 or 5 million is going to the flat fee advisor there's only so much money you can't make money grow on a tree, that 10,000 pounds could have been invested in over 30 years. Yeah, that would have made a lot of money. It's just maths. The conflict thing I do think is that there's some truth in that but that comes back to you know, how honest are you and your integrity and that's why you know, I have a very steep tiered structure you know, it's it's 1% on the first half a million and then point two five on the balance most of my clients have more than half a million when they disinvest you know what it doesn't actually impact my bottom line that much and I'd like to think I wouldn't I get a strange buzz from telling people to spend the money you know, we do the cash flow and they're spending the kids inheritance skiing SSK i i like it even though part of me must know intuitively what this is going to knock a few pounds off the bottom line but just just just being able to tell people such great news i don't i honestly I don't have a problem with it. I don't think I've ever had a conflict where I thought afterwards you know what, that was just for me to get some money I should have told them to pay off the mortgage we're having also the fact that most of my class and probably you are retirees so the debt question is kind of just that's in the in the in, in the past. And in terms of most of the money I manage is existing money that's already been invested. I'm not it's very rarely I'm saying to class invest new money and I do do it you know, top up devices and put some money in a GI but most of it is you've got these seven or eight pension pots, you've got this ICER over here, you've got this unit trust let's just put it all together. So it's money that's already there already products most people need products to reach their financial salvation to hit financial independence and the fact that taking money from a product I don't think clients that doesn't have a conflicting message if you're saying to clients all the time, our value is behavior modification and sticking to the plan is not about investment performance. The fact that money comes from the investments isn't it I don't see that as a big issue. And the fact that and this is this is a lazy thing it's as as the and the alluded to it's just easier man it's just this weekend paid one and call to a degree you mentioned we get paid X percent a year it comes off your investments you're a sentient adult or regulated thinks you don't understand percentages. You obviously bloody can because you've got some wealth and success in your life, you're not them, we charge X percent it just comes off your investments. That's it, job done no standing orders, no direct debits, no gocardless or anything like that. And it's clean but that's a self serving argument to a degree because it's easier for us as well. And your points about the market cycles Yeah, okay fine. Maybe you know, there are some really badly run firms out there they just haven't got any capital reserves they they just spend what they what they bring in each year and that's what the reserves you know, you got to if you have a lean business you can get through the downtimes and you do where the client pain as much as they do and you know, we're always saying to our clients, the advance is permanent and the Aum model business for the business income will permanently go up there will be temporary declines because the markets go through temporary declines but I'm not knocking one way or the other I think Alan you I mean what you've done is magnificent and to have the competence in your in your in your value and the ability to sell flat fees when everyone else is doing it off the investment assets. That's absolutely magnificent. The main thing for me is are you transparent? That's and that's I can't hammer RDR was a fantastic thing for this profession. It can it changed a lot of the industrial ifas into professional ifas and I know a lot of them did go from three plus a half commission to three plus a half fee or three plus one. We certainly don't know I'm not plus or not plus one I don't charge you Is your face you know, and it says if you want to walk away from me at any stage you walk away, it was only part as friends you know, I, as I say heavily discounted a larger portfolios, nice and easy job done. And he pushed back, I want

Alan Smith: 56:28

to come back just a couple of brief points and then I'll wrap up for this episode because as you say this this you could spend an entire afternoon or a day or as long as you want discussing this. And and there's, you know, believe me there's there's merits for and against. I mean, we have learned a lot of lessons, there is a lot of behavioral finance behavioral thoughts around even positioning it because, you know, when we just look, we literally decided, as of tomorrow we're going to do this basically came up with our, how we arrived at all our fees. And we just started talking to clients. And obviously I've been in many rooms has been a positioning things for a prospective client, and I'm saying our fee is 12,000 pounds, and it just sounds like a lot of money. versus you know, if it was a 1% or half percent, it would actually be more money actual fee would be more but it sounds it sounds to the prospective client. Like nothing, there's no doubt about I agree that you need people aren't stupid, but that sorry,

Nick Lincoln: 57:19

does that say that 12,000 pounds equate 2.95% of AUM. Exactly.

Alan Smith: 57:26

You know that client. But there have been situations where I've said our fee is and I've said the amount and they said, Oh, that sounds a bit steep. And I've told them what they're currently paying. And it's like double it. But it's in percentage terms. So there's a lot of learnings. The other thing, this whole thing is, is very misunderstood when you get into the murky world of alternative fee structures there for all that. And I know a lot of the people, the firms that are charging, flat fees, retainer subscriptions, you name it, the almost all different or almost all different, some charge exactly the same fee, regardless of the client client with 20 million pounds or client with 200,000 pounds, same fee, which which we do and that's the other thing to be aware of, I think you alluded to it, Nick, we do have because we do recognize the value and definitely for client has got significantly more assets. Or there's a lot more complexity, this is the key thing here, you know, a client with a million pounds, but he's got three offshore bond structures or something. He's got your two ex wives, he's got all sorts of stuff going on in their lives. Versus the client who's just, you know, sold a house or someone's got a million pounds in cash and says, what how should I invest this? They've got the same quantum if you like, but the value and the complexity are significantly different. Why should one pay exactly the same as the other just doesn't make sense? The thing about the the yes, you write our fees, I think the key thing is with a subscription model, we reserve the right and we do increase our fees in line with the prevailing rate of inflation. Obviously, we're in a, an inflation spike right now. But what we know is long term inflation is lower than capital market returns are so important of investing. We're all about trying to get a model that we are profit, every single client is profitable, we're making our margin and our costs are off as our costs go up. We're increasing our fees in line with them not in line with the equity markets, because our costs go up in line with the equity market. So we believe it's a fairer model. And the last thing I'm going to say and it's just our you know, it's our of our view, in our opinion, we're talking about having a profession as a profession as opposed to an industry. You compare yourself to other professions, I mean, real professions, if you go and get, you know, surgery, you're gonna get knee surgery at a Harley Street surgeon private hospital in Harley Street, for example, you want to get the best surgeon, if he said to you how much money you got. And you say, Well, I've got quite a lot money, a lot of money. He says, Well, I'm gonna charge you double, because you've got low money. How much have you got? Well, I don't have a lot of money here. Okay, I'll charge you a lower fee. That's the issue. Our model is predicated on how wealthy you are, and there is an increased value. The bottom line product is roughly the same. There are benefits, there are advantages for some with more complex affairs. But that's and I'm just trying to have a fee structure which is aligned to other real professions and not sales industries like estate agents.

Nick Lincoln: 1:00:12

Okay to point on to two points there. I mean, if you see a Harley Street surgeon, they know you've got money in the first place. So that analogy is falls flat a little bit from my point of view, I don't want to be compared to solicitors. Thank you. I don't want to be compared to accountants like do we do something different? The fact they can't charge the way we can charge is neither here nor there. So I think we've gone beyond this thing of comparing ourselves to other professions and feeling sort of looking up to these people on pedestals because I think we're at least in terms of the value we add the equal and I'm sure we've all got with the legal profession, you know this. But we've all had conveyancing nightmares, right. And it's like, we are so far ahead in terms of service to some people in other in other in quotes, professions. I'm looking at the cameras. I'm not looking at the screen, Andy. Thank you, my friend. Oh, yeah.

Andy Hart: 1:00:56

A couple of points to finish on. Hats off to you Alan. I mean, you have done something very difficult. That you didn't have to do it would have been maybe a bit easier for you to continue on the on the Aum model so well known for definitely yeah, I think a lot of people do confuse when they hear fixed fees. They all stink low. So I'm sure you've got contacted by so many people going oh ma Lewis said that I've got to find a fixed fee person, what is it? 40 quid a month? And you're like, No, it's like, yeah,

Alan Smith: 1:01:20

we will. We have. Yeah, we've had exactly that we've got a few interesting conversations, or love your fee model, and you tell her how much it is or what you would

Andy Hart: 1:01:30

value and also a lot of the other firms that we know that are successful in this space, they also charge high, agreed fees or subscription fees. fixed fees are obviously again, a bit of a misnomer. I mean, I do like the word the Nick Murray, quote, this doesn't mean anything's good or bad. But Nick Murray says, I charge 1% a year to help you avoid the mistakes, which costs multiples of 1% a year, which is basically what Nick was alluding to. Nick Lincoln. The final point, talk about fees is the hybrid model. I think the hybrid models got legs, you know, an agreed fee with the client and still a percentage AUM on the investments because it is the administrative to manage it, I believe the more wealth does equal more challenges and issues to deal with the clients. I think the hybrids got legs, you know, an agreed subscription fee per month, that sort of fair across everybody, because that's the sort of core offering. And then the more wealth like for example, 200 quid a month plus 0.3, on the investments or whatever it is, that might be the closest thing to perfect, which obviously doesn't exist over Tuco.

Carl Widger: 1:02:38

Thanks. A question for you, Alan. Right. So we've spent a good few minutes talking about what are probably the cons and then the pros, or maybe the Aum model, and a lot of times talking about the pros of the fee model. But you're seven years in now, it can't all be plain sailing. So what would you say? Are the drawbacks of the model that you currently have? And what would you like to kind of? What are the things that you'd like to smooth out over the obviously, it's, it remains top of your agenda, because it's one of your USPS as you see it. So how do you how do you smooth out the problems that you have at the moment? And how does it look in three, five years time? Yeah,

Alan Smith: 1:03:19

that is a really good question. Car. Andy's already said this. There have been moments full disclosure when we've me and my colleagues have sat around and say, Why the hell did we do this because it does make life a bit more difficult. Now sometimes it makes life really good and smooth and easy. And sometimes we've absolutely had clients come and knock on our door, specifically, and it wouldn't have been they would not have signed up become clients that we were AUM sensitive, they've told us that. So that's those are the good days. And the challenging ones are when it's you're trying to articulate. So we have learned I've mentioned a minute ago, because we just decided it's very sort of typical of me and my colleagues here capital, we decide on something we just say, let's just go all in, let's just as of tomorrow, let's do this. And we hadn't really thought it through, we hadn't really thought through our our comms our narrative, our pitch our language, we just said the fee is. And our you know, we have various fee tiers for your models, fee models, and it was you know, by any standards, pretty punchy, you know, as the word fees up to 14,000 pounds 25,000 pounds a year. So you mentioning that, and it just sounds like a lot of money. So we that's the challenge is articulating that explaining it in language that the client or prospective client is gets and understands. There are challenges around because we can't automate the inflation, uplift. So we've got to have that conversation with clients. And of course, if inflation has been pretty benign since we started, this has been, you know, close to zero, so it wasn't that big a deal. But now we're having to have conversations and you know, get it back on the table. And it's I think it's a very, it's probably a similar in Ireland, but it's a very British thing. No one likes talking about money. So we've got to bring up at our, you know, annual planning meetings. Oh, by the way, can we talk about the fee structure, we're going to have to adjust and increase the fee structure. That's maybe a conversation you'd rather not have. And if you had an AUM model, just automate, automate, it isn't that you just sort of picking it up. And just to be clear on that as well, we apart from a few, a few select clients, we still charge the same way as everyone else does it as much as we take it from the cash account on the platform. So very few of our clients are actually paying standing orders. Although some are

Nick Lincoln: 1:05:29

that's my question. Yeah, that's my question. How do you adjust a project? How do you collect your monthly fees? Okay,

Alan Smith: 1:05:33

yeah, it the same way as you did, but we would tell Transact or whoever else that we use. This is our fee. But it's so it's a bit more labor intensive, put it that way. Ours is to do that, and we got to review it. When we did our initial, we did do some planning. Before we launched, we look to all our clients, and we and we built these sort of three fee structures, but effectively based on simple standard and complex clients, and we apply that as a kind of as a model across all our clients just sort of based on our own opinion. We came to the conclusion that our fee revenue would increase quite significantly. And that's all it is that a lot of our clients were effectively underpaying and it was more the complex clients did have a fair bit of money, but there was Yeah, we all know there are some clients that are and the you know, the potential or the are great clients, but my God, you're doing a lot of work for them. And they are getting really good value for money versus a client, you can barely drag in for a, you know, an annual meeting, because we're very happy they're getting on with their life, and they are, but the paying similar sort of fees. So we did do some analysis, but then you got to go back and have those sometimes can be challenging conversations with those clients, those complex clients and say, you are actually underpaying relative to the value that we are delivering. So those are some of the things definitely the the articulation of the value proposition and how we've arrived at it. Has it has had its moments of Challenge car, and I think we've had to learn in real time, we've had to build better scripts, sort of pitch decks explanations as to how we've arrived. Because sometimes people say, Well, how are we what have you arrived at that? Because not a percent? If it's not a percentage, what is it then? And we've got our own sort of story behind that and the same way as we can. And certainly, we can absolutely we've got we've got a grandly grandly titled algorithm internally, we've got a pricing model, we've got we know, we've been doing this a long time, we know how we've arrived at a fee, and particularly for the larger fees we do speak to a number of colleagues will look at it and say, what what fee would you charge so that we're not a mass market business, you will be struggling to do this at scale, you know, with 1000s 1000s of clients, because we're actually pricing every single client that comes to us. And it is based on a number of variables. And so that's that, in itself is a challenge. It's not just odd, if you had to hire that, you know, call you out and hiring a lot of people, right, that we're gonna get three or four or five or 10 advisors come in here, I think it'd be a challenge for us to articulate to them and train them as to how we've arrived at, we do have a pricing structure, there's a degree of flexibility for the advisors to be able to, to work around that depending on the client's circumstances. But yeah, those are some of the things I have to say, as you said earlier on, and the I've known a lot of firms that have gone down this route. And I've known quite a few that have backtracked. They said, it's just too difficult. It's too difficult, or they've changed or they've gone the hybrid route. So far, as far as a webinar would have not the only one. We have made a success of it. We're still in business, we're still profitable. We're still winning new business and still winning new clients. And we've had to learn in real time. How to explain it, how to position how to defend it, I suppose. We've definitely lost some earlier prospects. We lost some people knocking on each some people just said, yeah, it's too complicated. The guy died. Just 1% I get that. That's

Carl Widger: 1:08:46

simple. And I can understand it. Yeah, I can understand and Camilla will clearly will put the scripts on the algorithm in the show notes and you know,

Alan Smith: 1:08:55

they cost extra but for you, my friend

Carl Widger: 1:09:02

I look it's it's annual Hampshire, and it's, look, it's either really good conversation, and

Alan Smith: 1:09:08

maybe we maybe have a bit of debate or trap live next year. We'll sort of go into the weeds on it if you want. I will share

Andy Hart: 1:09:15

a couple of points maybe Yeah,

Carl Widger: 1:09:17

nobody. It definitely gets me thinking and you know, it's there's no world out.

Alan Smith: 1:09:25

There is not kind of just

Nick Lincoln: 1:09:29

rambling both Thank you. Damn, good thrashing. Yeah. Jesus Christ. 69 minutes of my life, right. Let's go on to the next part of the show because I can see posters at the front door, the bolting sack. And these are the questions posed by our beloved TRAPPIST, you know, the routine trap babies, there's a link in the pinned tweet, you put your questions there and of the so called show notes, and eventually we'll get to your question. We're still about 1520 questions to get through. As I said earlier, better Jim, have a question put to us yesterday, which we're looking forward to answering in the future show. But the first question is from let's have a look at this. This envelope is particularly well sealed. This is from Jess he'll, Jess he'll choose either Jeremy Jeremy Jeremy. Hello. My question relates oh, by the way, this question if you think we've just answered this, then we'll guys we'll just move on from it. But Hello, my question relates to cost of advice and the cost of financial services. There is a drive in all industries to reduce costs to the consumer a good thing, but if the advisor is generating value to the client, then cost should reflect the value added. The constant drive to reduce costs undervalues the work being done let the bigger firms drive down costs and deliver generic advice whilst the smaller firms focus on niche areas but charge according to the value they deliver. Adam Davidson's book, the passion economy highlights this really well. This is also linked to Pareto is 8020 rule. What are your thoughts on this? Andy? You were twitching in my screen? I'm not.

Andy Hart: 1:11:02

I'm not gonna ask the answer the question but just a bit of backstory about Jeremy. He's spent his career in the military. So he's an ex Army Major, I believe and he's making his transition into our mighty profession. I think for the last five or six years, I think he they've retired quite early in the army. I can't quote his age, but I think he's sort of late 30s, maybe early 40s, they spent the last five or six years consuming personal finance and wanting to get more and more into this space. So yeah, I'm just gonna say, welcome Jeremy into this mighty profession, and are you going to be a sort of great success in it? I know, you've just recently taken a new job. So I've already answered this question, but I'm just sort of putting a bit of a backstory to it. There might be other people listening to this that might want to get involved in personal finance. It is a fantastic career profession calling. It is hard work, the apprenticeship stays quite long. But if you get through that you're in a, you're in a fantastic place. Any others wish to answer that?

Alan Smith: 1:11:56

I'll, I'll attempt to I think the last however long it was 20 minutes. 30 minutes that we discussed will help answer a fair amount of Jazz's question somewhat, this thing about all industries, there's a drive in all industries to reduce cost to the consumer. I mean, that's just a natural evolution of commoditization. There's certain things you know, driven by the likes of Amazon on others, you know, a lot of

Nick Lincoln: 1:12:23

capitalism and innovation and

Alan Smith: 1:12:27

but here's where things differ. And this is where the beauty of financial planning can be different your written so there are mass market commoditized product, any commoditized market is all about cost. If you want to buy a bottle of water or whatever it is, or something that's some household goods, cleaning detergent or something, within reason, it's really about about the cost. Whereas what we do is different and you can differentiate yourself. The beauty of the four of us and I think a lot of the listeners is that we are very intentionally running either solo practices or boutique businesses. So we have the ability to differentiate ourselves from the mass market if you want mass market, low cost, go to a nutmeg or whoever the cold are or various other organizations. We just buy a fund Vanguard would be an example Vanguard, an outstanding business but it's a commoditized service. As we know, they struggled to deliver personalized advice. They closed down their advice business in the UK, so it's different so the individual boutique business which can differentiate themselves from a commoditized mass market business has the opportunity to control their fees and costs far better. There's also a third Rory Sutherland talk about a type of goods or product. You've heard it Veblen V B. L. E. N, you heard of this Veblen goods, which actually the more expensive they are, the more attractive they are. So think Rolex watches Porsches, Ferraris, numerous other goods. Some parts of financial planning done well are a bit like that. I mean, we know that we know that to the, to the audience, you know, to to sort of the general public, some kind of so called high end, hedge fund type things were super expensive, but they are attractive because they're expensive. There are there are some large wealth management companies which seem to be seem to thrive despite the fact they're a bit more expensive. So I would say in answer to well, it's really just as what are your thoughts on this? My thoughts are protect. Protect your margin, protect your pricing power, by differentiating your service and avoiding any commoditization arrest my case.

Nick Lincoln: 1:14:29

Okay, well said, Right. Thank you. I think we should move on to the next question. And this is from this this oh, this this missive has come from Greece. This is from Philip Dragoo. Miss and I find that we know Phil the Greek he's, he's on LinkedIn. Just he'll by the way didn't have a social link. So jazz, if you are on Twitter, I can't put in the show notes because you didn't drop it into the form. Fill degree Miss asks, If you are a one man band, and you run in house, advise model portfolios, not NPS? Should you consider forming an investment committee overseeing your allocations, fun choices and due diligence procedures? If so, who would you get to be on the committee? Okay, well, my first stab at that this of this, okay? I mean, this really, this is all about putting things in a line or getting it getting your ducks in a line or whatever the phrase is, this isn't active versus passive kind of question for me, because I think once you've made that move to say passive I don't think you need as a one man band, you don't need an investment committee, and you don't need model portfolios. So it's got to be Vanguard, or dimensional or a combination of the two. Don't really sweat it mainly in equities and not 100% in equities, job done, I don't think you need an investment committee unless you're insecure, or you just you just feel you have to have it on your file if the FCA you know, want validation for why you've chosen those funds, and you can't communicate that to them without having something to lean on. Which is, I don't know it's a bit bit of a crutch. If you're active. Yeah. Because Christ knows how you do it. You may want to outsource those though. That's my thoughts. If you guys have got anything to add on that, but if you would, if you were to outsource, who would you who would who would you use for that kind of thing.

Alan Smith: 1:16:01

Timeline in a word, that I mean, Abraham and his team have just got a out of a box ready made thing with an investment committee, with collateral with all this stuff. If you if you want to Of course, as you've seen it, you don't have to do that at all, you can just do you do use one fund? And imagine you having your investment committee, Nick, you talking to so shall we, about the one fund appear short meeting?

Nick Lincoln: 1:16:29

No, there's still be arguments involved with the word

Alan Smith: 1:16:31

there were there were for sure guarantee. I mean, there's obviously there's a few of these organizations around to me, timeline is a kind of natural fit right now, for businesses just outsource they do everything. And you can brand it in your own brand, your company's name and details, etc. So that's a shout out for timeline for me, what do you think, Andy?

Andy Hart: 1:16:52

I sort of agree with both of your points. There is some collateral out there from these large organizations that provide to this collateral out there. So I used to be part of that sort of an investment committee where me and two other financial advisors met up, I think we met up every six months, it was quite interesting, actually, we did sweat the small stuff and discuss the detail. Which was okay, because it was every six months. So we just wrote down sort of points that we wanted to raise during the meeting, because they weren't sort of pressing issues, and then just discussed it amongst the three of us. So it's basically Long story short, it's a mastermind. So get a mastermind together of similar people that run similar businesses that want to get get together every six months or every year. And to the fat. There are sort of template downloads you can get from various support companies. But yeah, so someone

Alan Smith: 1:17:48

just said that if you

Andy Hart: 1:17:50

are a dimensional have a whole suite dimensional have got the everything about your how to build and in some of the agenda, some of the compliance companies and stuff as well, back to you look,

Nick Lincoln: 1:18:01

very good call you okay, but that just move on. Okay, thank you, sir. All right. That's great. Good. So a couple of interesting questions there, from our beloved, our beloved TRAPPIST and as I said in the piece that I put together for nucleus wrap, we you know, we value your input, because you are the show because we are, you know, we are you, you you are us we're practicing advisors, talking to but also wanted to talk with our audience, so please do keep the questions coming in. Okay, without any further ado, let's go on to culture corner. Wow. Okay, so Mr. Smith, painkiller, white collar drug dealers. Mr. Hart, even sorry,

Andy Hart: 1:18:43

yeah, overspray. This is the latest Netflix documentary series called painkiller, which is about the oxy cotton, you know, opioid epidemic that was started in the US. Again, it's, you know, around sort of corporate greed and all of the sort of tricks are up to, obviously, white collar drug dealing. There's another app, there's another series called dope sick, which is also along a similar vein. It's absolutely staggering, watching the destruction that this, you know, horrendous drug has had all across America. I think for the first time in the history of the US. Every likes it life expectancy is declining due to the impact of this. Yeah, it's a wonderful documentary all around the Sackler company, sorry, the Sackler family. Purdue pharma, which is the business again, it's manipulation. Persuasion marketing. Yeah, it's a it's horrendous to watch very insightful to watch but but horrendous the impact has had. So yeah, I recommend checking out it's called a pain killer. Back to you boss. Okay, thank

Nick Lincoln: 1:19:55

you very much now sorry Mr. Smith. This next one is yours this the BBC sounds The Wolf of crypto which wow, I just it's yeah, you described

Alan Smith: 1:20:05

Yeah. And and I started watching that Netflix thing last night? What's the first episode really just in cipher and it kind of it's just I just find it just annoying in the extreme and just some angry making, you know, the how these organizations as companies can do this stuff. Anyway, that's

Andy Hart: 1:20:23

even worse than the crack epidemic, the crack epidemic, it was just corporate that

Alan Smith: 1:20:27

knowing that limit, but executives and senior executives that these drugs and pharma companies, they know exactly what they're doing is killing, killing, killing any young people. So a whole other story anyway. Yes, I came across this other days. Well, BBC sounds has got various podcasts and things and they've come up with some quite good ones now and again, this one is called The Wolf of crypto and what your you can imagine what that's going to be about. But what's particularly interesting about this is often we will we come across these things, and they're usually you know, in the US or the Bahamas, and Sam, what's his name and all these sort of crazy things that go on in other parts of the world. This was much closer to home in that the kind of the the, the epicenter was in a place called Amersham pretty much was just up the road. My mother in law lives there. It's kind of half an hour outside of London is not a million miles away from where you two UK based advisors live and operate from. So it's very close to home. And it's, you know, it's another salutary tale of the craziness that went on a couple of years ago around 2021. When a guy who was a, he was a kind of a rodent Inspector, he was a kind of a pest removal guy. He thought he came up with this idea of starting his own cryptocurrency called coder, I believe Kay Roden coin, he wrote, yeah, rat coin. And it's just, it's amazing how you can just you could just start a coin, just start one and then just and all it is is about talking to people. So he used to drink in a local pub up at Amersham and you speak to the landlord about it before you know it, and they just decide what the value is. And of course, everyone wants to buy it. And it sounds crazy. That sounds funny, he was actually really sad if you if you listened to the whole story. Unfortunately, there is at least one person who's committed suicide over the losses, they've been completely wiped out. Because of course, it's not a real thing. It's just a story. It's the classic Ponzi scheme. Everyone wants to buy it, you've got all the people who are drinking in this local pub, they're actually they're actually taking this crypto token as payment for your beer and what have you. So I mean, I guess the the landlord or the one of the pub didn't do very well, although he speaks about it, but the whole how everything get caught up the guy who founded this, this sort of crypto note coin had had an event here just you know, a very short distance from where I'm speaking to you right now in the City of London at you know, tower 42, which is the old man west tower. You know, he had this, you know, rented all these kind of Lamborghinis outside hired literally porn stars, porn stars and dwarfs.

Nick Lincoln: 1:22:57

For this event flags Do you want to be waving? So he

Alan Smith: 1:23:01

actually people were queuing up. And during this event, they were just saying if you don't buy now the whole the price is gonna go up. So you have loads of people were literally putting their life savings into this thing. And guess what happened of course, is sort of blow is just doesn't it doesn't pretty much doesn't exist anymore. The value is zero or as close to zero as can be. Really interesting story, because in particular, it's so close to home. It was around memes around us. Literally in the last 18 months, two years, it's well worth listening to some BB. The Wolf of

Nick Lincoln: 1:23:31

crypto, the madness of crowds. And yeah, that the pub is as I looked it up yesterday is about 10 miles from me. And it's a very sad it's a very sad story. But however, there probably won't stop me going driving over there going to that pub and saying in a very loud voice, can I have a pint of cola coda, please, just to see what the responses from the landlord will probably throw me out of a very thick window very fast as me next Okay, a long time in finance podcast, the Nine Lives of Credit Suisse kind of in the background over this year, because there's other stuff been going on, I suppose. And we're still consumable, and I guess the news cycle is still consumed with with sending more money to Ukraine. But Credit Suisse has kind of gone down the crapper. It's an old product has been taken over. It's obviously a long standing Swiss bank. And this podcast is quite as to to city duffers that they're both been journalist in and around the square mile for the last 3040 years. And it's a two part two parts. breakdown of the nine lines of credit, Swiss credit Swiss has basically been quite a rogue brand for a long, long time. And they just made mistake after mistake after mistake. And I think we know so we think Swiss banks are, you know, they're the pinnacle, you know, they are they're just they just do it Roberts, they paid out over 11 billion US dollars in fines over the years. And most of those fines are come in recent years. And that that is now the Dyneema. So that's quite an interesting one. And it's quite nice. It's quite as well done. It's an optically heavy, you don't need to know about swaps, derivatives or anything like that. But yeah, again, a big big brand absolutely trashed, linked to that. And

Alan Smith: 1:25:00

I listened to that I listened to that yesterday, Nick, when you posted it. I don't love those two guys, the way they talk, I must say because they were talking about you know, these banks losing millions and billions and been fine and all just they'll just laugh in their heads. It's as you say, to all city, Duff was gonna go find another billion. I just I didn't know that was just me, I just got to wind me up a little bit how they were just kind of making light of it. Because I thought real issues about this, because I don't really understand how and it's another one of these sort of strange behavioral things, but they're super high net worth us these organizations like Credit Suisse and you know, other Swiss banks and others like them, and they entrust their family's life savings to them. And I did a thought experiment a while ago, you put the name of any of these organizations tap it into Google and then put the next word fine. Like Credit Suisse, UBS, but uh, you name it Cootes you name it. And the word fine and you will see story after story after story for the most nefarious crimes for money laundering for tax evasion for you and and if you're a multi millionaire client, you get your hand across your life savings to these organizations and and entrust your future family security to them. I just don't get it. It's

Nick Lincoln: 1:26:15

the thing, man My name's Andy, you're gonna make a point? Yes, that

Andy Hart: 1:26:18

whole safety thing, isn't it when someone's got 100,000,500 million etc? Yeah, following on from Credit Suisse being bought fire sale via the Swiss government to UBS, UBS have just announced the largest ever quarterly profit for a bank in history. I think it was about 60 billion around that number. So yes, staggering.

Nick Lincoln: 1:26:41

Okay, thanks. All right. Thanks, guys. And last, but by no means least, it's the voice. It's Mr. Mr. Mr. Winslow and Ben Carlson. Yeah,

Carl Widger: 1:26:52

I'd be brief to finish up. I'm sure loads of our listeners are already connected with our following Ben Carlson a wealth of common sense on Twitter. I love his articles, because they're all absolutely well researched. And based in evidence, and he, the latest one that I that it is in the shownotes is the 6040 portfolio is alive and well. So to contradict, and I suppose make sure that we're not in echo chambers. It kind of gives evidence as to why you'd be well placed in a 6040 fund going forward. I liked it. And as you guys know, as Andy is shaking his head vigorously, as you guys know, I'm sticking to my guns, I think bonds and portfolios. Okay, I think it's a good place to be if you're looking to the long term. And it was nice for me to read that and get some affirmation that maybe it was right. So that's it from me.

Nick Lincoln: 1:27:58

It was nice for Carl to have his biases confirmed. Okay. Now, I'm going to ask, we are that's another pile of crap in the pan. Normally, I asked for your to review a six out of five star review as minimum six out of five stars. But apparently that's not enough anymore. I've also got to ask that you subscribe to our but I mean, what you're listening to it now. Am I missing something obvious,

Alan Smith: 1:28:22

I probably just hit the subscribe button just if you're on Spotify or Apple podcast where they just hit the subscribe button, which means they will automatically arrive in your feed without you having to look it out. And you'll be the first to hear these wonderful new episodes.

Andy Hart: 1:28:35

It helps us in the rankings to find new listeners. So yeah, please do do that.

Alan Smith: 1:28:39

Yeah, it helps us to spread the word, make this more sort of broader audience. So please do subscribe. And of course, give us a six or a five star review. Thank you.

Nick Lincoln: 1:28:52

Okay, and also do likewise with our burgeoning YouTube channel if you can like and subscribe to that. That will be fantastic. But until the next time deer Trappists it's pretty awesome. Take care out there folks. Thank you for your time. Bye.

Carl Widger: 1:29:06

Bye everybody. Bow