What we do

How do we get paid?

Remuneration, in principle

We recognise that different clients have different requirements and this extends to the way in which they like an adviser to be paid. We are therefore flexible in terms of remuneration method, provided that both parties agree that it is fair and clear. This means that advice and ongoing support can be funded by fees paid by clients, by commissions paid by product providers, or by a combination of the two.

Regardless of the precise remuneration method agreed, we believe that the following principles are important for mutually beneficial relationships: -

• No charge is made for an introductory meeting with a new client, or for time spent with an existing client, agreeing the description of the work to be carried out.
• Remuneration should take into account the time, complexity and specialist knowledge needed.
• Remuneration should be agreed by client and adviser, rather than be arbitrarily determined by a third party.
• Some clients should not (effectively) overpay for their advice, in order to subsidise others who underpay (or pay nothing).

Dangers of traditional approaches

The commission system is still the commonest method and the one that most of us have become familiar with. However, familiarity and frequency of usage do not necessarily make something fair or appropriate. The commission system is driven by the need for companies to sell product. They therefore remunerate advisers for the end result of a product sale. Any consultation process that the client and adviser have been through, to reach this result, is financially irrelevant to the product provider. However, in many cases, it is this process which represents the real value for the client.

Care is needed when using the traditional commission only approach because: -

• A client may have doubts as to how objective an adviser can be, when different recommendation scenarios result in different levels of remuneration.
• Most commissions are paid on a ‘pro rata' basis, with the commission being determined by the size of the premium. This can result in inappropriate remuneration levels for particularly large and particularly small plans. In cases where the best advice does not involve a product sale, the adviser will not get paid at all.

Many advisers, who offer a fee-based alternative to commission, do so, on an hourly rate basis. While this reduces the emphasis on product sales, the approach does still have dangers. For example: -

• Payment depends on adviser efficiency (or inefficiency) rather than the value received by the client.
• The client does not know, at outset, precisely what their financial commitment will be. They may be reluctant to contact or meet with the adviser, for fear of incurring additional costs.

Some advice, which may provide tremendous client value, will be the result of the adviser having spent years studying, reading, attending courses, achieving qualifications and developing expertise. The advice is a result of accumulated knowledge, rather than time spent on the specific solution.

Remuneration, in practice

We recognise that many clients prefer us to be remunerated by the commission available from the product provider. We therefore are happy to use this route provided that:-

• Theres is a clear mutual expectation and intention to purchase a product;
• The commission available is sufficient to pay for our time;
• The level of commission actually received is agreed between you and us, rather than automatically being the standard level paid by the product provider

For large premiums, where standard commission would be excessive for the work done, we will reduce the commission we take. For small premiums, where standard commission would be insufficient for our work, we will need to work on a fee basis (although the commission available could be offset to reduce the fee payable).

A fee approach breaks down the advice process into defined stages. Each stage of the process is agreed and costed at outset. You then pay for the work done, regardless of whether or not a product is purchased. If a product purchase does result, you may still choose to use the product commission available to fund the fees. For large premiums, we will only take enough commission to cover our agreed fee, while for small premiums, we can use the commission to reduce the fee payable.

It would be inappropriate for an initial review, which is not necessarily expected to lead to a product purchase, to be funded by commission. Where a review of this type is required, we will agree a fee basis. If the review subsequently results in a product purchase, and you choose, we can then use product commission to fund or contribute towards the fee.

Ongoing maintenance services do not routinely generate new product commissions. The cost of these services can be funded by: -

• Renewal or trail commissions, if available from existing arrangements, or
• Client retainer fees, or
• A combination of these two components.

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