The same but different
by Doug Brodie
Everything we do, we do it for you.
Apologies, Bryan Adams clearly did the well known anthemic song, but we thought you’d be amused to see that there was a spin-off from Bucks Fizz.
Why am I pointing this out? There’s actually a relevant strand to our work here, almost every one of our clients comes to us via work we do in the media; we do sporadic advertising in the Sunday Times for name awareness and recognition, however the main drivers of enquiries are our commenting, research, interviews and publications via the Sunday Times editorials, the FT, the Times, Investors Chronicle and various trades, including Citywire.
Before you talk to us you don’t know us from the proverbial Adam so our objective is to create an awareness and environment with you that engenders security, confidence, familiarity and empathy – all those are essential ingredients of ‘trust’.
To the mix we then add expertise and that is evidenced to strangers via the white papers and our blogs. I know you remember Bucks Fizz, and I also know you tried to remember ‘Everything Must Pass’ in the intro email you received because we grew up with the same music, TV, clothes, holidays 3-day-weeks that you had – take that further and we want you to know we understand your frustrations with the world today, as well as that at age 62 you will have been dealing with issues with your parents, and probably funding your nascent adult kids. We want you to know we understand.
First off…
When you first come to us we will allocate up to an hour or so of meeting time, either online or here in Chancery Lane. We know you’re quite rightly sceptical, and at the age of 50/60/70 there’s no Plan B, we are normally dealing with our clients’ life savings, so we allocate this time to show how we make your money make more money, the assets we use, how we work out how much income is needed and how much is feasible.
“We never hold client money, we have no products or funds of our own, we are independent of all institutions and the only revenue we have is the fees paid to us by our clients.”
For seconds…
Having run through the mechanics of financial planning and investing on screen, nothing happens whatsoever unless you ask for a proposal from us – you ask us, not the other way round. This proposal is called a Scope of Work and it itemises all the relevant assets, income and expenditure that you tell us, it outlines the plan we can deliver, what success in that planning will look like and the cost of the work.
To do this we first send you a few documents online: the factfind is where you note down values of things – pensions, house(s), ISAs and expenditure. Because this is personal financial data we need a signed Terms of Business document which includes our Data Protection policy and GDPR statements. Lastly, there is a rough & ready tick box risk questionnaire that gives a couple of insights.
And then…
The Scope of Work tells you what the plan will consist of and the various costs – cost of the plan, cost of setting everything up and the execution & reconciliations, and the annual cost of running the investment portfolio and reporting to you.
We do everything.
Here’s a little secret – 80% of our work is administration. Because we are independent we don’t tie your money to just one provider with one set of systems. This means there is a lot of manual work and we think that is valuable for you.
Scottish Mortgage? Of course. A Vanguard SIPP? By all means. A short date gilt portfolio? All yours. L&G or Lloyds Bank shares? Happy to discuss. A 20x leveraged ETF on the S&P500? We could do (but you probably shouldn’t).
The average number of pensions that a client has when they come to us is three; then there’s his & her ISAs, and innumerable bank accounts. We need signed letters of authority for all the providers and then the FCA insists that we prepare a price and terms calculation and assessment of each.
As many know, amongst the eleven platforms we use to hold client money we frequently favour AJ Bell, however before we make any transfer recommendation, we do a back-to-back comparison, it’s in writing, in the recommendation report we provide to you and held in your space in the client portal. Alongside that recommendation report is the key features document, the regulated illustration and other formal documentation.
With the recommendation report comes the financial plan on the Voyant system – we will run a meeting here or online and talk you through your lifetime cashflow, we will show you alternative versions of your cashflow using alternatives products and strategies, the record is currently 41 versions), including annual income tax and CGT calculations, market collapse resilience and – if warranted – the maximum annual income through your life so the last cheque you write, at your grave site, bounces. Hurrah!
Your income table
We are probably unique in the way we present income projections; our core specialisation is recreating final salary-type monthly income whilst retaining client capital. The income is not guaranteed, it is ‘probable’ and given we have been doing this since 1994 it works and it’s reliable.
When we talk income, we mean ‘pounds, shillings & pence’, not just a % yield.
This is a real client projection – we would be foolish to make such a suggestion of annual income unless we were pretty sure of delivery, otherwise our clients wouldn’t hang around for very long; it would also be quite awkward at the next annual update meeting!
You’ve read the report, seen the zoom and said go.
At every stage following the letters of authority we do all the communication and requests for information with your existing providers – you do nothing. We get the information and report back to you. This is why every client has both a designated client manager as well as an adviser.
We cannot move any money at any time, nor buy or sell any investment, without first confirming to you and receiving in return your written or recorded confirmation. In this way you are reassured that nothing happens to your money without the ‘why’ being explained and demonstrated to you first. Every action we take is confirmed in our records, those records are always available for reference if you’ve lost your copy, and these demonstrate our liability to you for the suitability of the advice we have provided.
Our advice to you is insured, to protect you.
As a regulated firm we have to carry professional indemnity insurance that insures the advice we provide to you. Sometimes thing go wrong, and if that happens we will put it right straight away – no fuss, no questions. The team here have been regulated since 1989 so we’re quite expert in what ‘suitable’ is, what it looks like, and – importantly – how to convey that understanding to our clients. You don’t want a text book on the legal and tax intricacies of different pension legislation affecting today’s contracts, you do want to know that your recommended product is ‘best of breed’ and is the most suitable option for you.
Having given us the OK to proceed, your client manager arranges the relevant application forms for you – some are online, some are not. Some accept DocuSign, some demand we get signatures. Some will verify your ID via online tools, some will demand copies of bank statements, contract notes and even a copy of Great Aunt Mary’s will as source of your funds (that is unfortunately no exaggeration).
We then handle the liaison with the provider to have the application duly accepted, we verify the details are correct and then enter the details onto our own back office system. Then we monitor and chivvy through the transfer of the money or cash from previous contracts – which often throws up new stumbling blocks – “We don’t accept the class of units that the client holds in the existing SIPP / ISA / GIA”. That happens a lot – worse, if the holding is in a GIA (general investment account) there may well be a capital gain that you / we don’t want to crystallise …. So now what?
A client had a portfolio of £750k and needed a 4% income to provide £30k per year. A simple task but for the fact that the incumbent stockbroker had allowed a £40k US investment to become £250k of that £750k so we couldn’t get the income without paying £60k in capital gains tax – reducing the money available to us to £690k, and income to the client at £27.6k.
This scenario happens a lot. As financial planners we have to plan and recommend efficient tax strategies for you, and the position above is very non-binary, it’s a grey area – what should the client do? Sell in order to buy the income assets for a lower amount? Hold on and hope for the best, selling capital year by year?
We find solutions, and it often takes a lot of time and correspondence – you can’t blunder on, there are many attached consequences.
It takes time (like you wouldn’t believe)
When you first take income from an investment, the platform provider (AJ Bell, Transact, Aviva, Fidelity et al) needs to check that the bank they are paying to is actually yours. They usually need an original bank statement – you only bank with an online bank? That is often a problem for providers.
Once that’s done, if you are taking taxable income from a pension, it is paid via PAYE at the provider’s end, just the same way every employer runs PAYE. However, the government’s system is that the first payment is based on ‘Month 1’ (emergency) tax and that is often a problem.
• For example: if you and your partner are (just) retired and have been living off your savings, in March you might decide to take £12k out of your pension to use up your tax free personal allowance. The trouble is that the government insist that the £12k you take in March is taxed as if you are taking £12k every month, being £144k a year, and they will tell the provider to deduct 45% tax, and removal of your personal allowance (as the income is over £100k). In short time you can claim the tax back.
• To get round this aberration, we will normally suggest you take a £10 taxable income before you need cash, to trigger the PAYE tax code and get it back to what it should actually be before you draw the material sum.
Leaving aside tax, if you have carefully chosen a provider for your money many moons ago, you’ll often find that in the current times they are not as efficient as you would like.
On 23rd July 2024 we submitted the client request to draw tax free cash from his SIPP. On 11th March 2025 the payment was eventually received.
I have no idea how much time Martin spent working to get that tax free lump sum; the problem started when Martin realised the crystallisation figures the provider was using were wrong, and then everything kind of went south from there. Had we been charging this client (an accountant) by the hour the final bill would have ended up in the £thousands, so in this case we have certainly not been paid for our time. We are a service provider, this is how we work, we are non-transactional and sometimes running a client account takes an interminable time, it just does.
We don’t take shortcuts
We do what is right, not what is easy. It’s your money, it needs to be done correctly, not quickly (though correct and quick is always preferred).
After the first year or so a client decided to draw money from her pension, previously untouched, uncrystallised. The client needed a flat monthly income, however for tax efficiency, the UPFLS (uncrystallised pension fund lump sum) method was more tax efficient, enabling the client to have tax free cash and income below the personal allowance for the year – no income tax to pay, can’t be more tax efficient than that.
That method is, however, admin heavy – it doesn’t affect the client, the work is ours, and we don’t charge any extra for it, it’s what’s included within our service. It’s important to know and remember that the pension commencement lump sum is just that: a lump sum. It is not a tax free pension allowance so it cannot be a regular payment (the clue is in the name: ‘lump sum’).
Can you take £36,000 in annual income from your pension without paying any income tax? Yes indeed, however it’s not as simple as you think. (Some people might just prefer to pay income tax from the outset).
The contract’s set, the money is in, and then…
It’s only once the cash is in and reconciled that we can accurately measure the prices and yields of assets and report back to the client what the portfolio allocation will be and what income will be available. In creating the portfolio using investment trusts listed on the stockmarket the share price is relevant – if it has jumped up, and is perhaps sitting at a large premium, we won’t want to buy, we’ll want to sit and wait (never for long, these things are cyclical), and that means that the client (you) is paying us to tell you to sit in cash. That’s the right thing not the easy thing, and it’s what we get paid to do.
If you’re a client, you’ll know that the once the portfolio is agreed with you we then phase the money into the assets to guaranteed we avoid committing your money at the top of the market. We’ll phase over 3 – 6 months, and we’ll explain why, in writing, and have this confirmed back by you. Once the trades are placed, the income tables can be confirmed – only then because that is the only time that we know precisely how many shares you own, and therefore what your dividend payments will be. Now we can complete the reconciliation of assets into our back office system and ensure this tallies with the projected income in the Voyant cashflow planning system.
There’s a computer in your car
Most cars on the road today have an ECU, and electronic control unit; this manages how the engine functions, it finesses the combustion and power according to the parameters set, the ambient temperature, whether it detects ice on the road, traffic around it, whether you are in ‘stop / start’ or motorway traffic. If I showed you a picture of one you’d probably not recognise it, and you certainly don’t get asked ‘Would you like to start your ECU?’ when you get into the car. But it’s there, it’s controlling your car even though you didn’t expressly buy it, you never see it and you never question it.
Every Formula 1 car generates around 1.1 million telemetry data points, per second. Lewis Hamilton doesn’t do anything with the 1.1 million signals, he just knows the car does or doesn’t drive well. You might not be able to ‘buy’ a comparable car, but you could buy a Porsche 911 for around £200k, and enjoy the security from the ‘thousands of decisions per second being made by it to keep you on the safe side of the road.
We are your financial planning ECU: you don’t see the work under the bonnet but it happens, we are in the office from around 8 till 6 five days per week, keeping the income as expected.
Final salary pension schemes with more than 5,000 member have operating costs of (currently) £546 per member. PLSA 42nd annual survey.
Do you have a final salary pension? If so you’ll probably never have stopped to think about it but it costs at least £3 million to operate it – and that does not include investment management. You’ll not see the admin and operating functions but that doesn’t mean they are not happening, after all, that £3m per year is paying for something.
We do the same thing, however we do it just for you, as your own personal, bespoke final salary pension. You won’t see the data review meeting this afternoon with Kseniia, looking at the velocity of revenue reserves across the research database, not the meeting with fund managers of Murray International yesterday afternoon. You just need to know they are there and the meetings happen.
REP025 app rep RegData
As a triple check, we record our relevant business statistics with the FCA. They monitor our cashflows and our solvency, they check how many advisers we have and whether or not the directors have relevant competencies. We submit to them the CPD that everyone does, the continual learning of techniques, legislation, regulation and investments throughout the year so that we can ensure the reviews of a client’s products and portfolios are up to date, not outdated. A s226 pension was appropriate once but no more.
Again, you don’t need to know about our FCA monitoring, you just need to know it’s there.
And after everything is said and done
With the portfolios in place, when all is quiet on the client front, aside from the generic, company-wide research and development we do, twice a year we stop the clock and take a snapshot valuation of your assets and report them back to you. This is done manually because we are independent and currently have money sitting with around 47 asset managers and banks. This allows us to audit and check.
Every Tuesday morning here we run a cash reconciliation across all client accounts: we download and put together tables showing all the cash in all the products – per individual client. This is security for you, it is portfolio finessing to ensure only the right amount of cash is held. Again, you just need to know it’s there.
And the annual update: once a year we prepare a report for each client that reconciles every penny of income generated over the past year and the capital movements over the period. It then breaks out a performance of each asset you hold and breaks down all the charges paid – to us, to the pension provider and to the asset managers. We check this data against your Voyant cashflow plan and update all the figures there. We produce a report for you that goes into your space in the portal where you have online, 24/7 access from anywhere in the world. That done, we are now prepared to have the annual update meeting with you – either by zoom or here. the meetings generally take 1.5 – 2 hours, and are followed by the minutes and the actions that are needed, if any, to add/increase/alter your portfolios or your income.
Time
We track time but we don’t charge per hour. It takes between 40 – 60 hours during the first year with a client, involving several meetings and lots of correspondence, and after that it takes 20 – 30 hours per client per year. Some years are much busier than others, however we simply do whatever it takes.