The Adviser’s Dilemma

A monthly column where Emma unpacks real-life situations from across the profession and shares a fresh perspective.
Each month you'll find the latest column published here and also featured in Money Marketing Magazine.
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Dear Emma,

The ad valorem percentage of assets under management fee model feels entirely conflicted.

Can it really be right to charge one client who has a £1m pension 10 times the fee you charge a very similar client who happens to have a £100,000 pension?

It seems impossible to justify that fee differential and also leads to an inherent conflict of interest.

Increasingly, clients are beginning to ask about this, and I’d be interested in some guidance.

Yours,
CEO in Conflict

Dear CEO in Conflict,

Thank you for your letter. I want to be upfront before I say anything else: fee models are absolutely not my area of expertise.

I’ve never run a financial planning firm. I can’t tell you what to charge or how, or whether the ad valorem model is right or wrong. There are people far better placed than me to help you with that.

But here’s why I answered your letter anyway, and where I hope to offer a fresh perspective.

This is, on the face of it, a question about fee structures. And yet, here you are, writing to a column devoted to the human dimensions and dilemmas in financial advice. That’s not accidental.

There’s a whole other version of this response where I focus upon the value of advice itself; on how I believe that, as portfolios, pensions and technical expertise become the commodity, it’s relationships themselves that become the product.

In this version, I’d talk about how to make the value in your relationships more tangible to your clients, so that the question of fees becomes an explicit conversation about your working alliance and how best to co-create, shape and build a strong allyship.

But I think you’re actually asking a different question.

Listen to your own language for the clues. You describe a fee model that is entirely conflicted and a fee differential that is impossible to justify. There’s no nuance or ambiguity there. You’re not on the fence. You have a clear and firm belief.

And yet, at the same time, you’re running a business that is, right now, operating within the very model you’re certain is wrong. I imagine there is a specific type of discomfort – possibly even loneliness – in living day to day with this tension.

So, while your question is, on the face of it, a practical one – what do I say? how do I reassure clients? how do I advocate for my business when they ask about fees? – I think you already know the answer to that one.

You know that, however well you prepare for those conversations – however well you get your arguments and rationale on point – if your heart isn’t in the answer, clients will sense it. They’ll pick up the micro-signals of your disconnect before you’ve finished your first sentence, however fluently you talk the talk.

I think the real question you’re asking is, ‘How can I justify our fee model without compromising my own integrity?’ And that, of course, is a different question entirely.

To answer it, I want to offer two suggestions for you to think about.

The first is to begin to look inward. To get clearer on your own values and to take them more seriously. Not necessarily to drive any particular course of action, but so that, whatever choices you make, you make them with full self-awareness.

There is a world of difference between making a compromise from a place of clarity and choice, and making one while trying to avoid looking it too closely in the eye.

You may decide to make peace with the tension you’re experiencing. Or you may not. But either way, you’ll be doing it from a place of solidity rather than avoidance or contortion. A good coach or mentor could be invaluable here.

The second suggestion is to look outward for support and perspective. This is not your problem to solve alone. The tension between personal integrity and commercial reality is one of the defining questions of professional life. It’s much bigger than you.

And yet, at the same time, behaving in ways that feel incongruent with our values can feel isolating. There’s often a pervasive feeling of doing wrong, or being bad, in ways that it’s hard to articulate.

So, I encourage you to find people with whom you can think this through honestly. People who aren’t invested in the decisions you come to. This might be a peer group from inside or outside financial services, a former colleague/boss/mentor or a trusted counterpart at another firm with whom you can fully be yourself.

Thank you for writing in, CEO in Conflict. My response may not have answered your question in the way you expected. But I hope that you – and perhaps others reading – will find something of value in it.

Warmly,
Emma

A CEO in conflict

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