Annual Financial Planning Fees.


Welcome to part 3 of the 3 part series on FEES.

Annual financial planning fees, are as the name suggests an annual fee paid to your financial planner, for the ongoing work done throughout the year, after your initial financial plan has been created and the recommendations implemented. In this final post on the fees you can expect to pay when dealing with a lifestyle financial planner, i will discuss in more detail, the WHAT, the WHY and the HOW of annual financial planning fees


Annual financial planning fees  are an agreed upon fee,usually a percentage of the assets managed, paid to your financial planner for the annual management of your financial plan and relationship. When thinking of the reason for paying an annual fee to someone who you have already paid an initial fee and an implementation fee, it helps in understanding what you are getting in return for said fee, or rather what your Lifestyle Financial Planner is doing for the fee. The big difference between a broker and lifestyle financial planner is that a broker is being paid an annual fee to manage the returns of your investment, a lifestyle financial planner is being paid to manage the outcome of the financial plan, the investment returns are only a single part of that plan, and to be honest neither the lifestyle financial planner nor the broker can control the investment returns(more on this in another post).

So what does the annual management of your financial plan entail:

  • Admin:

Statements,tax certificates, withdrawals, cash flow plans,communication strategy, all of the above would have been discussed in your initial financial planning meetings and a suitable strategy put in place, eg, quarterly statements emailed, weekly newsletter sent out, invitations to presentations sent out, and any relevant communication specific to you and your plan and investment strategy.

  • Access:

Basically 24/7 access to your lifestyle financial planner and his team on all matters relevant to your financial plan and concerns or ideas you may have.

  • Annual Review:

This is similar to your initial planning meeting, and similarly charged for, but rather than incur an upfront fee again, it is recouped during the course of the year through the annual financial planning fee. This session should be treated with the same importance by you and your planner as the initial financial planning meetings, and not treated as a meeting to just discuss returns.

  • Monitoring:

Your planner should be constantly monitoring the environment in which your plan is built and communicating any changes which will affect your plan or outcomes, this is not a once a year thing, you want someone who is keeping abreast with all things relevant to your situation and plan.

The WHY:

So why agree to pay an annual fee? Its best positioned as a retainer fee, apart from all of the above agreed and documented commitments, you have year round access to someone who’s primary role is to ensure the success of your financial plan, you have access to someone who has compleated a professional qualification in the field that they work,someone who has to maintain this qualification through continuous professional Development(CPD), obtaining hours for Ethics, Knowledge, Workshops etc, so you can rest assured that your planner is always at the forefront of all things which may affect your desired outcome. This access though is only worth anything if it’s called upon, the above ADMIN,ACCESS,ANNUAL REVIEW,MONITORING are commitments made by the planner to fulfil the year round success of your plan, you need to draw on your planners expertise for matters that arise in your world, as and when. Your financial plan is a living, breathing, ever-changing plan, and not something only addressed once a year, you are paying for year round attention, you might as well use it. It’s also important to note that your planner is similar to a guide, He or She has helped you identify a problem you are having and co created a plan with you to overcome this problem, and the annual evaluation and hand holding is there to ensure that the plan ends in success and helps you avoid failure.

The HOW:

Currently the annual financial planning fee is expressed as a percentage of the assets managed, in my world it  is charged on a sliding scale (IE reduces as the investments managed increases).It is achieved through the Asset Manager who physically sells out of the portfolio and the pays the fees across to the planner. In time to come we will be able to provide more flexibility around this, IE, invoice the client directly for the fee and not recover it from the investment, or invoice the asset manager directly and have it recovered from the investment. In the instance of an insurance product, these annual fees are usually a Present value of all future payments to be recieved.Because its generally expressed as a percentage of the value of investments, your planner has some skin in the game, if your portfolio grows and meets objectives, you as the client will be satisfied and the planner will be rewarded for this, if the portfolio is not meeting the expectation set out in the plan, and is falling behind the investment strategy, so to are the RANDs earned by your planner.

To end off this series there are 3 main points I want to highlight:

Transparency, Value and Results:

I believe that if your Lifestyle Financial planner is able to create value for you by identifying your problems, creating a plan to overcome these problems, which results in success and avoids failure, and  is able to do so in a completely transparent way, then he deserves the fees he charges, and as long as you know what these fees are upfront and they are fully disclosed, then you are already far better off than most people in their relationship with their financial planner.

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