Professional Adviser Debates
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Scott-sinclair1-80x80 Moderator

Scott Sinclair

Moderator

Moderator

That's it folks - our adviser charging debate examining the legitimacy of percentage charging in a post-RDR world is over. But who between our proposer Alan Smith and opposer Clive Waller goes home with the win?

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Closing Statement

Proposer Alan-smith-capital-am-80x80

Alan Smith

chief executive, Capital Asset Management

In the blue corner

At the end of the day, all advisory firms are free to consider and decide what service and fee model works best for their business and their clients. My interest in prompting this debate was to challenge the long established standard model that was created by product manufacturers in a different era.

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Opposer Cover-websize-355-80x80

Clive Waller

founding partner, CWC Research

In the pink corner

I am delighted that this has proved to be an excellent debate with balanced, sensible views on both sides - this is what makes a market. In order for the advice sector to mature into a profession, such debate is essential so that standards across the board are high, building confidence and trust amongst existing and potential clients. So let's stir things up, just a wee bit!

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Chris-fry-80x80 Scott-sinclair1-80x80

Scott Sinclair

editor, Professional Adviser

Moderator

Apparently the FCA is keeping one eye on this debate, as well it might. This is a regulator that has gone out of its way to be seen to be listening to the regulated masses, and charging has been on its radar in recent years.

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Rebuttals

Proposer Alan-smith-capital-am-80x80

Alan Smith

chief executive, Capital Asset Management

In the blue corner

I disagree that a move to flat fees would disenfranchise the majority. If the fee is set at the right level, provides excellent value for money and delivers solutions to your client's problems, the fact that you charge a flat fee rather than a percentage is broadly neutral - that applies whether the client is a £50,000 client or a £5m client.

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Opposer Cover-websize-355-80x80

Clive Waller

founding partner, CWC Research

In the pink corner

Alan says that ad valorem favours the little guy. I agree and thank goodness for that! The greatest argument for the maintenance of ad valorem is that it gives the smaller investor (and ‘smaller' is very relative) a chance of getting good financial advice. Long may this be so.

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Chris-fry-80x80 Scott-sinclair1-80x80

Scott Sinclair

editor, Professional Adviser

Moderator

I was hardly putting my neck on the line, was I, when I suggested this head-to-head was going to be a close call? After two days of top debatery between our proposer Alan Smith and opposer Clive Waller - plus a top guest contribution from journalist John Lappin - voting remains too close to call.

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Guest Phase

John-lappin-80x80 Chris-fry-80x80

John Lappin

founder, Mindful Money

Guest

In an ideal world, fees would be contingent on the work done by the expert adviser, not determined by the amount invested. However, I baulk at any suggestion this should become the blueprint or the norm across the current advice market.

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Opening Statements

Proposer Alan-smith-capital-am-80x80

Alan Smith

chief executive, Capital Asset Management

In the blue corner

The percentage of assets model is a relic from a bygone era of product selling, fund distribution and opaque commission payments. It has no place in the modern, professional ‘fee for service' environment that great financial planning firms now occupy.

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Opposer Cover-websize-355-80x80

Clive Waller

founding partner, CWC Research

In the pink corner

Among the many reasons to maintain percentage fees, one remains hugely important: The Retail Distribution Review. The RDR made advice unaffordable for far too many - though we will not know quite how many until trail commission goes in 2016. A move to flat fees would disenfranchise all but the top 5% of the population - give or take. If anyone believes this is good for the industry - sorry mate, you're nuts!

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Chris-fry-80x80 Scott-sinclair1-80x80

Scott Sinclair

editor, Professional Adviser

Moderator

Few topics pique advisers' interest quite like charging models...

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At a glance

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47%
53%

42%
58%

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About this debate

Few topics pique advisers' interest quite like charging models.

In this key debate, Capital Asset Management CEO Alan Smith suggests percentage models not only encourage sales but also, inexplicably, punish advisers when assets leave their management and reward them when they arrive. Fundamentally, he argues, percentage models effectively represent a relationship, not with the client, but with their assets.

Opposing this view is Clive Waller, a former chairman of an IFA business and now a founding partner of CWC Research. As well as pointing out firms can - and should - charge how they like (within regulatory boundaries of course), Clive argues flat fees essentially disenfranchise all but the top 5% of the population.

We invite readers to take onboard the views of both our proposer (Alan) and proposer before sharing their views and voting. We will be running this debate throughout the week, beginning with opening statements, then following with rebuttals. We will then have a 'guest phase' (Mindful Money's John Lappin) before, finally, publishing our contributors' closing statements.

You can change your vote at any time, and we will be sharing the results of our debate at the end of the week.

We hope you find the debate interesting and informative.

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