Guest Author: Max Horne – The Lifestyle Funding Expert
After over 40 years in the UK’s financial advisory field , I came to a critical realisation a few years ago that many financial advisors and wealth managers prioritise your money over your life’s vision. This approach is totally unsuited to business building owners and entrepreneurs.
At the beginning of any business, the owner wants to invest surplus funds into growing their business — it’s where they get the big return on investment.
98.7% of FCA regulated financial advisors operate a remuneration model that is dependent on assets under management (AUM) typically 1% per annum.
Many financial advisors and wealth managers will not take on a client unless they have at least £150,000 to invest with them, and with entrepreneurs reinvesting the profits back into their business , you are therefore not interesting to them. The current fee model of most financial advisors in the UK does not suit you ,as they are not interested until you accumulate funds that they can invest and earn their fee.
It has always been puzzling to me why the millionaire with £2m of investable assets should pay a greater amount than the person with a smaller amount of assets. Why should the millionaire effectively subsidise the other? Investable assets of £2m versus £200,000 represents a 10 times fee but they certainly don’t get 10 times the value of the advice or importantly, 10 times the investment return. In my experience the advice is very similar, just the numbers are bigger. It is a classic Robin Hood of “Robbing the rich…”
This advice model, inherently asset-dependent, raises ethical questions about the alignment of client and advisor interests. Fixed fees are the sensible alternative.
My experience of working with many entrepreneurs is that in the early years you strive to build a very profitable business . You then look at repaying a mortgage, buying a bigger house and perhaps a second home. And ultimately perhaps sell the business and exit. Pension payments are only made along the way for tax purposes.
In contrast , a Lifestyle Financial Advisor who charges a fixed fee for their services, present a model that is asset-neutral. This approach not only welcomes individuals regardless of their investable assets , but also aligns more closely with a philosophy of unbiased, client-centric advice
The merit of fixed fees lies in their transparency and alignment with the client’s best interests. By decoupling fees from asset management, Lifestyle Financial Advisors can offer holistic advice that encompasses a broader spectrum of financial planning, including savings, debt management, and wealth distribution strategies that may not contribute to the traditional advisors asset base.
What my experience shows is that the entrepreneur craves personal financial freedom, more time to do the things they want and peace of mind.
What you need throughout your business and entrepreneurial career is financial guidance and coaching. Someone to bounce ideas off. A second opinion. Someone to tell you the truth about money! Answering the “Am I going to be alright?” question. Most accountants are interested in your business finances, preparing statutory accounts and saving you corporate tax but not interested in your personal life, goals and aspirations.
A truly effective Lifestyle Financial Advisor delves deeper, asking questions beyond the usual risk assessments . It’s about understanding your life, do you dream of retiring early, supporting family ambitions or perhaps transitioning into a lifestyle business. This approach shifts the focus from a mere “Return on Investment “ to a more meaningful “Return on Life”
The typical Regulated Financial Advisor in the UK will tell you that the real value they bring is to recommend investment funds that over time will bring you a “Return on Investment”. This is now a myth as research has shown that investing in a passive “Index Fund” will beat most actively managed funds when the investment charges are taken into account. Quite often this passive approach can save more than 1% per annum resulting in saving a small fortune over a long period of time. Index Fund providers such as Vanguard and Fidelity are now attracting the bulk of new investor funds around the world. This simpler approach puts more money in your pocket.
The goal of modern financial advice should be to align your financial decisions with how you want to spend your time, transforming money from a goal into a tool for achieving your life’s aspirations.
Time, not money, is our most precious resource.
If you are interested in learning more about this method and how it can benefit you, drop me a message to max@maxhorne.com
About Max Horne
A Chartered Wealth Manager and Certified Financial Planner, with over four decades dedicated to independent financial planning for business owners and entrepreneurs.