Wealth ≠ Complexity
In light of events in London over the weekend, you might be expecting some kind of tired, old marathon metaphor this week. Pushing through the pain, persisting - that kind of thing.
Sorry to disappoint, but as extraordinary as Sunday was (man ran under two hours, Womble finished marathon) - we’re going in a slightly different direction this week.
As I am a bit of a data nerd, I’ve spent the last couple of years recording the amount of time that I spend on each case for each of the clients I work with.
There are a couple of reasons for this - 1. So I can ensure that each client is getting “value for money” in terms of time spent on their matter and 2. I can get a sense of how many clients the business can look after properly at capacity.
The below chart shows the relationship between the clients’ “investable assets” (on the y-axis) and the time I have spent on their case in minutes over the past year (on the x-axis).1
Now, if you can find a trend in there I’d love to hear about it because I can’t.
And that kind of aligns with what I thought on day one. That a clients’ wealth would be a poor predictor of the amount of time that case would require to manage on an ongoing basis.
The traditional wealth management model charges based on a percentage of the clients’ assets. The most common rationale being that wealthier folks have more complex affairs and therefore will demand more time from the business.
But based on my professional experience that isn’t always the case.
Wealthier clients may have perfectly simple affairs which can be dealt with in a relatively straightforward manner. While the less wealthy client may come to us with a “messier” situation and/or require more guidance and “hand holding”. It isn’t really possible to tell from the outset.
Therefore, it seems unfair to me to “punish” the more affluent client by charging more for a service that costs the same, or less, for the business to deliver.
Which is one of the reasons why we charge the way we charge.
Have a great weekend.
None of the above is intended to represent advice to any specific individual. If you have any specific queries regarding your individual position, you can contact me at david@beechgrovefinancialplanning.co.uk.
I have only included clients where I have been working with them for at least twelve months to try to strip out any initial “onboarding time”.
Interesting data Dave, which maybe I’ll call you henceforth ;-). Having been in your shoes as a FP business owner i’d posit that pricing is an art not a science. Ultimately it needs to be fair to the client, of course, reflect the value received (of which time is not a necessarily good measure), your experience and efficiency and enable you business owner to earn a decent salary, pay all costs and make a reasonable profit. A fascinating equation…