Free at Last – Fees at Last
This month H.J.Scott & Co. proudly celebrates 10 years of freedom. Freedom for us as a business and freedom for our clients. The 1st June 2005 was D-Day. Like all things the UK financial regulator does, it was “bigged up”. D-Day stood for Depolarisation Day. It wasn’t a great idea and the execution didn’t deliver on the promises. But it made us think and we decided to draw a line in the sand.
We went fee only as a business. We turned our back on commission. Never again would we accept payment for the advice we give to our clients, from the insurance companies that provided the products. We assumed many businesses would do the same. They didn’t. They preferred to remain in the murky, back-hand world that kept them alive. They were commission junkies, needing their monthly fix from the insurance company pushers.
We were told we would go under and be forced back to the nasty old ways within months. The IFA who offered that prophesy ceased to trade 5 years later.
A Brave New World
There were no insurance companies who offered the option to cancel commissions in a simple way. Instead commissions were rebated back into products and clients received a higher allocation of units. Could we see this in practice. No. We were told to trust them. Seriously do I look like I was born yesterday.
With no help from traditional providers of products, new holders of savings were sought and we entered the brave new world of self-invested personal pensions, fund supermarkets and finally wrap platforms. Products with transparency. Where charges could be calculated and checked to ensure clients weren’t getting a raw deal. It all seems old hat today, but ten years ago there was no proof it would work.
Now fees weren’t for everyone. We had 1400 policyholders at that stage, we told the vast majority that if they wanted to know our fees going forward we would tell them if they asked. Very few did. We had secured our top 34 clients and had promised them the Earth. One by one we saw the rest of the policyholders where we knew paying fees would be better than being charged commission and gradually client numbers built up to around 100. We were looking after clients which collectively held £10,000,000 with us.
Everybody’s doin’ it
The Retail Distribution Review hit on 1st January 2013. Commission is now banned. Commission junkies are out of business, life companies are either reinventing themselves, dead or dying. The industry is becoming a profession slowly. We had an 8 year start on them.
Our bravery has paid off. Today we only look after 187 clients, but we manage over £53,000,000. That’s £53,000,000 more than we should have, if Insurance Companies had put their clients needs before their shareholders demands.
Raise a glass to the next 10 years. I don’t believe there will ever be much more than £50,000,000 that we manage. 200 clients is enough. My job now is to give my clients the confidence to spend and enjoy their life-savings.