Advisers using percentage charges would not make it past the four investors on television show Dragon's Den, according to Capital Asset Management chief executive Alan Smith.
Speaking at the Personal Finance Society Festival, long time flat-fee advocate Smith (pictured) said planners need to recognise that charging clients a percentage of their investments was not a good way of demonstrating value.
He used the example of going before the panel on Dragons' Den, outlining increased life expectancy, pensions freedoms, tax changes, tax rules and showing that there is a huge need and demand for a financial planning service.
He continued: 'So they say "I'm interested, what are your numbers?" And you say "well what we do is we link our revenue to the stock and bond markets". They say "some years that will fall 20-30%, so your revenues will fall 20-30%". You can just imagine at that point them saying "I'm out".'
Smith said financial planning covered more than just investments, so charges needed to reflect this.
'We are here to solve problems and move from managing money to managing lives.'
Smith presented the example of an early stage conversation with a client who had just sold his business for £3 million. The client had multiple properties and investments.
He recalled the client, upon clarifying that investing £3 million meant being charged £30,000 a year, £2 million being £20,000 a year, and so on, said 'you're mad!'
Smith added: 'That led onto a further conversation in my mind, which is how would other business people outside our industry look at the way most of us charge for our services?'