The evolution of adviser charging models in practiceDennis Hall – Yellowtail Financial PlanningAdam Young – Dragonfly Planning

Objectives for the Business

To develop a valuable client centric proposition

To provide services that a client wants and needs at a commercially viable price

Understanding your target market

Positioning your suite of services (and skills) around opportunities and threats that your target market are facing

Becoming the “go to” specialist in that sector/market

Building a trusted relationship and community to enhance your services

The Solutions ......

Avoiding product noise.......

Dragonfly Evolution

Attributes for Success

VALUE

Source: JP Morgan

Dragonfly’s Journey & Perspective

The world is changing, and we must adapt to survive

Working on a pure fee basis has removed perceived conflict of interest

Our primary operational model is based on flat fees renewed annually

Yellowtail story – fees version 1.0Single (value based) fee - our wish list• Easy to understand• Rewarded us for advice on other assets• Removed any product biases• Alignment of interests• Attractive to long term client relationships• Sustainable • RDR ready• Market advantage• Removed from commission model

Yellowtail story – fees version 1.0Single (value based) fee - results• Lasted less than a year• Existing clients initially accepted it• Prospective clients sceptical• Nobody liked it (including us)• Raised more questions than it answered• ‘Horse’ trading over value of other assets

Yellowtail story – fees version 2.0Range of tiered fixed fees• Sign on fee• Negotiate from £5,000• Annual fees based on AUM• Broadly 0.5% or less• Focus on Financial Planning• Annual or more frequent reviews• Capped• Calculated on an underlying hourly rate

Yellowtail story – fees version 2.0Range of tiered fixed fees – the results• Easier to explain• Too much negotiating on the initial fee• Too much emphasis on Financial Planning• Sold lots of financial plans• Didn’t build AUM quickly• Difficult cash-flow position• Trouble with value proposition during credit crunch• Doing more work than we were being paid for

Yellowtail story – fees version 3.0Fixed, Hourly and Value Based Fees.• Financial Planning Fee 50% up front - 50% on completion• £2,500+VAT initial • Implementation fee based on hours spent (VAT exempt)• Value based fee 0.5% AUM (+VAT)• Introduced Satisfaction Guarantee• Created value proposition for financial planning• Sample menu of charges for implementation

Yellowtail story – fees version 3.0Fixed, Hourly and Value Based fees – Results• Attracted financial planning work • A barrier to people wanting long term relationship• Better cash-flow but long time before AUM increased• Clients nervous about hourly fees• Happy to pay fees for each stage • Still not making decent profit

Yellowtail story – fees version 4.0Fixed, Value and Value Based Fees • Kept the initial fee the same• Changed to value based fees for implementation• Increased the ongoing AUM from 0.5% to 1% on first £1m• 0.35% funds in excess of £1m• Additional project fees for planning

Yellowtail story – fees version 4.0Fixed, Value and Value Based Fees – Results• Increased revenue – best ever half year results• Lost some clients who wanted cheap work• Appeals to our HNW clients• Better client engagement• Moved everybody across

Yellowtail story – fees version 4.1Fixed, Value and Value Based Fees – next• Reduce the costs of entry• Speed up the pace of engagement• Refine the menu of additional services• Sell higher value planning

Professional Partnering

Freedom....