I was recently approached by a couple of guys who wanted to introduce pension clients to me. Every month. Given it had taken me from 2006 until 2020 to onboard 100 families on the face of things you are inclined to think ‘great stuff happy days’ I will quadruple my exiting business in just 1 year and it can start happening overnight. Here’s the summary note I sent to them…
Firstly, on paper, bringing in £2M per month / £24M per year is great. But please note, with average fund sizes at circa £68K it would be 352 new clients – every year, … and all of them need onboarding, and then looking after annually, with ongoing contact, and reporting, and a meeting – be that over the phone, or in person (minimum 45 minutes), minus any travel time, and they could literally be anywhere in the UK. A logistical and operational nightmare.
Turning to your proposed commercials, would half of my ongoing 1% fee cover all of this? £120K – in a word, no. I would be using 0.5% to cover costs – the 120K, and I am pretty sure that wouldn’t cover the costs in any event. And I’d be paying you 0.25% – so 60K and keeping the other 0.25% for myself so 60K again. It’s just not worth it for all the work involved. 352 clients are a huge workload even with the tech-based set up I have. Operating a prehistoric 1995 model with ‘agents’ [sorry I am now lol at this point] seeing clients … and up to 3 times did Mike say? No wonder they need the 10% commission you said they have previously been working with.
Summary – it doesn’t work, plus I don’t really want their agents 352 clients with 68K each. It’s a major headache and a load of work – both initially and ongoing. For literally no money. A client came in after you left the office yesterday. He retired and has around the same £68k AUM at 1%. I took him on in the early days and should probably have let him go by now. But I like to look after my early ‘onboarders’ rather than throw them overboard just because I’ve moved on, so it is what it is.
John has been in to see me twice in the last year or so. I’ve also spoken to his daughter about the investment strategy behind his portfolio – another half an hour. He has just about 68K – more or less what you can deliver as an average fund size! It’s costing me money to look after him. 352 of these clients are on the table who also have Daughters, but also ‘agents’ and then Mike and Gav. Just the thought of it is making me feel ill.
Added to all of that, I can’t run a 1995 model with platforms and bonds and MCPs and MIPS etc. They are all the same under the surface, they are just called different names. It’s a complete bag of bones. 2 of the platforms are also in Seychelles, Mauritius and so on. Live at the Apollo stuff guys. The only thing I’d run from 1995 would be a 993 911 turbo – the last of the air-cooled generation.
Second. The guys today. Mike is pure old school. An Allied Dunbar (applied crowbar) ex-sales manager. As I said to Hugh, they sent advisers to people houses and instructed them to stay put until the client had signed up, and given a referral. I wouldn’t want to work with him for many reasons – too many to list. I’m sure he’s a nice guy but I’ve met and worked with loads of them, back in the day. Gavin perhaps. It wouldn’t be a great fit and it would create issues and problems and cause me a load of grief. Added to that they don’t actually have the access to clients. Rather they have ‘agents’ that do. This is a pure nonstarter.
I would be responsible for those soldiers. They would be running around the country signing people up wearing a wilcocks badge. Even if it was all processed within a different marketing company as you suggest the FCA would still come after me. With a hammer. I am the regulated individual and would carry the regulatory responsibilities and I’d also be the CF30 covering all of the advice. They aren’t agents, they are giving advice, and they don’t have the necessary qualifications, licenses or CF30 permissions. It’s a straight nonstarter and potentially a serious breach of duty under FCA rules and regs.
Third. As an aside, if you’re talking about getting the leads directly yourself, you don’t need those T-rex’s and their ‘agents’ either. It’s a major headache, and a load of moving parts to manage. The wrong type of moving parts. On top of the clients. Even thinking about it I’m envisaging myself swinging from a tree.
Just to be clear, I would potentially take 68K clients and help them on on our light-touch service – if I was charging 3% initially, and then our 1% ongoing. And retaining the full 3 and 1. I’d have sufficient income upfront which would cover the approximate cost of bringing a client onboard – £1250 with a 30% margin. The funds would also grow to let’s say 100K over time and with 1 annual review, and a bit of contact on either side of the review, they would just be about profitable at £680 – £1000 per year. Albeit marginally and as long as they don’t turn into the type of client, I referred to earlier above whose Daughter I have to repeat the advice to.
Hence why I couldn’t take the work on, with all of that noise, chaos, and fee splits. It just doesn’t stack up on any level. I would be absolutely crazy. And suicidal within 6 months.
Best wishes,
Martin
