Hour/Fund fees

Question 1

Benefits of hourly fees 4 marks

Answer 1

• Easy to understand
• same as other professions
• amount invested is irrelevant
• a few cap can be agreed

Question 2

Drawbacks to hourly fees (4 marks)

Answer 2

• advisor could ‘run up the clock’
• may put clients off making contact as extra cost involved
• client must write a check
• can be high costs for small amounts invested

Question 3

Benefits to fund based fees

Answer 3

• maybe able to negotiate lower fees
• payment not from personal fund
• incentive for adviser to grow funds
• lower fees for lower investment

Question 4

Drawbacks to fund based fees

Answer 4

• difficult to predict the costs Year on year
• may not reflect advice provided
• extra charges for other services
• reduces potential investment growth