Since we opened our doors in 2005, we have always taken an innovative approach to fees.
Combining flat and variable elements, our approach is based on
how to align our interests with yours
where the value is being created
Fixed (in £) as a function of scope and complexity (typically between £2,500 and £5,000)
Discretionary portfolio management:
Combining a scope-dependent fixed fee (in £) and a size-dependent, semi-variable fee (%)
Arranging life insurance policies:
Percentage, with £ caps (paid as commission by insurers, part rebated)
A fairer way to charge
"Flatter fees are fairer because they reduce cross subsidies, conflicts of interest and different risk preferences between individuals and firms"
"Combining a fixed and variable fee element reflects the principle that part of the service is utility-like and scalable and part is added value as a function of size"
Estimate your total ongoing investment costs
Estimate your total ongoing investment costs
Our charges are totally transparent and as fair as they can be but because they are worked out differently from most firms some explanation of the table is required
These are the charges incurred for discretionary management of one or more goal-based portfolios for an individual or family unit. They apply after the separately-charged Initial Planning phase.
The charges for Fowler Drew in the two left boxes are subject to VAT for all UK-resident clients. Third-party costs in the right box include VAT charged by those third parties where applicable.
Clients incur some combination of the scope-related flat-rate charges in the first column plus the 0.20% of assets assigned to goal-based portfolios in the second column. The two combined make up the Fowler Drew charges. The third column shows third-party costs for the portfolio contents (mostly index-tracking products), including custody and transactions. The range shown above is a function of both the underlying exposures and the portfolio size (as custody charges are also partly fixed and partly size-dependent).
The flat-rate element is designed to reflect the resource cost (including the sunk costs in developing quantitative methods) of the solutions we provide, without cross subsidy between clients. These costs are not dependent on size. The size-related charge of 0.20% pa is designed to reflect the way individuals value a holistic wealth-management service, which is a function of the breadth and amount of wealth covered by the service. This element of our charges also meets the firm's costs and liabilities that are themselves size-dependent, namely risk capital, insurance and regulatory fees.
The £ fee that is equivalent to 0.20% of the resources assigned to all goals will be set at outset and reviewed annually in conjunction with annual meetings. To minimise the issuance of new fee mandates to platforms or your bank, small changes may not be implemented.
One impact of flatter fees is that the minimum portfolio size is dictated by the potential value relative to costs: the proposition must be a rational choice for the client. In most cases this means the entry level is about £0.5m. Arrangements may be made to smooth fees for clients who do not currently but will quickly meet the entry threshold, such as by paying a much higher variable rate and no fixed fee for a number of years. This ensures they are not subsidised by other clients.
Fowler Drew's combined fee is collected monthly by direct payment or from a platform (from whichever accounts it is most efficient to make the payments). Third-party costs are incurred by platform and by account as a function of the holdings in each.
Total investment costs are reported quarterly, as part of our performance reports, by goal. Since 2018, EU-wide regulation requires disclosure in an annual statement of all costs, in both currency amounts and %, disaggregated to show adviser charges, platform charges, product costs and transaction costs. The schedule above is consistent with this breakdown: the left boxes being the adviser costs and and the right box accounting for all other costs of investing.
How our total investment costs compare
With a large flat-fee element, Fowler Drew clients' total costs when expressed as a percentage of assets vary more between them than is typically the case in firms with only asset-based charges. In 2019 the median all-in cost across our business worked out as 0.7% (the median asset value per family unit being £5m). No family unit was above 1%.
Newly-disclosed industry rates for all-in costs vary considerably between firms, whether IFAs, banks or stockbrokers. Our research suggests that, at portfolio levels similar to ours, they mostly fall in a range of 1.0% to 2.5% pa.