I’ve always felt that financial advisers are under-appreciated especially when compared to fellow professionals such as accountants and solicitors. The problem is that much of the work of a financial adviser is intangible and, where it is tangible, the client doesn’t fully appreciate the value an adviser brings. Another reason is because financial advice is an optional professional service, unlike accountancy and law which are usually compulsory professional services. Have you ever considered doing your own conveyancing or preparing your business’s accounts?

Even our own clients do not always fully understand or appreciate what we have done for them! So in order to address this misunderstanding, we have started using a Value Added Checklist for our annual review meetings with clients. What we quickly ascertained was that the value we bring is typically 3-4 times what clients pay to us in fees! Yes, you read that right. 3-4 times.

Let me give you an example. We have an elderly, widowed gentleman who is aged 90. He has been a client of ours for 30 years. He invested £100,000 with us in 1991 and by 2021 his investment portfolio had risen in value to £1 million based wholly on our advice.

He has a total estate worth c.£1.8 million which is 100% free of Inheritance Tax again due to our advice. Most of his investments are free of Income Tax and Capital Gains Tax too. So he doesn’t even need to complete an annual Self Assessment Tax Return.

By the time his wife was admitted into a residential care home we had arranged her investments in such a way that they were not included in her estate for the purpose of the local authority’s financial assessment. The marital home was ignored because her husband, our client, still lived there. She paid zero care fees over a period of 3 years before she sadly passed away.

We calculated that over the 30 years we had saved our client at least £750,000 due to our advice and he had paid us about £150,000 in fees. That means the value we have added is 5 times our fees. Great value for money in anyone’s book I think you will agree. This is how the savings were calculated.

Inheritance Tax saved £320,000 (£800,000 x 40% assuming the first £1 million covered by IHT exemptions)

Extra investment returns £340,000 (c.2% p.a. higher returns annually on an average portfolio value of £500,000)

Care fees saved £90,000 (3 x £30,000)

Total savings £750,000

These savings do not take account of other savings which we have been unable to ascertain because they are difficult to measure or quantify. Arguably the extra investment returns we have produced for him should have been even higher because without our advice he would probably have left most of his money in bank accounts and Premium Bonds and achieved very low investment returns.

At our last review meeting, this same gentleman commented that our fees were high. Ironically we have been undercharging him for years because he has been a longstanding, loyal client. Instead of charging him our usual fee of 1% p.a. of the funds under management we have been charging him 0.5% p.a.

When I explained to him the value we had added and that we were only charging him half-price fees he was astonished and equally delighted at what great value for money our financial advice truly was.

Needless to say, he remains a very happy client to this day and long may it continue.* You know it makes sense.

*The value of your investment can fall as well as rise and is not guaranteed. The contents of this blog are for information purposes only and do not constitute individual advice. You should always seek professional advice from a specialist. All information is based on our current understanding of taxation, legislation and regulations in the current tax year. Any levels and bases of and relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future.