Client Engagement Letter (having concluded first meeting and prior to presentation/recommendation meeting)
Private and Confidential
Client full name and address here
Dear Penny,
I would like to thank you again for sharing your plans with me and I feel that I can offer you guidance in all areas, this will include possibly recommending leaving investments where they are presently.
As promised, I have summarised our meeting below with a few discussion points that I would like to follow up with you.
Your Current Situation:
You are currently retired and in receipt of £2460 per month income from your Unfunded Final Salary Scheme Pension and also £300 per month from your late husband’s pension. Total monthly income £2760.
Your monthly expenditure (in accordance with the budget planner we constructed) is approximately £900 which you confirmed in our meeting was accurate.
During our meeting you were comfortable to share with me other pensions and savings that you have and these are detailed below.
After completing the Attitude to Risk Profiler your suggested risk profile is 4 which is Cautious Balanced. The definition of which can be found on the profiler given to you on page 4.
We discussed risk profiles 3 & 5 and we agreed that you fit profile 4. However, at the end of the meeting you expressed that if you were to invest,you would not want to lose any money. Although this was in essence a flippant remark – it does have bearing and as such we should look to invest in low volatility and low risk areas and assets. As a risk profile category 4 - we will be able to look for growth which is key in relation to all investments we have discussed thus far. The rationale – to simply leave the money where it is invested is almost certainly going to erode the capital even from an inflationary perspective. Whilst after our first meeting we appear to be happy with levels of income – it is in the growth of the various pots of money that we need to investigate.
We will discuss this further when we look at each of your investments and cash assets as we can adopt different strategies to reach your goals and give you piece of mind.
Overview of your investments and pensions: -
Final Salary Scheme Pension
You have already taken your 25% tax free lump sum circa £102,000, which is currently deposited in your NatWest Acct. This is subject to inflationary erosion and could be invested for growth.
Advice discussion
You wanted advice as to what you could do with these funds that are currently on deposit.
At present you are not receiving the best interest as the funds are in your bank account – I can recommend an investment strategy to offer you better returns with low risk. The fund itself will obviously be left in situ for payment of pension income.
Scottish Widows Pension
Your current fund value is £201,000 as this is paid up.
Advice discussion
I will need to obtain the full pension pack from Prudential to identify the risk rating of this pension fund and to obtain projections. I left the letter of authority with you for me to gain information only from Prudential and I hope that will agree that these need to be assessed. If you are in agreement, then please sign this and return to me so I can request the information from Prudential.
It could be that you keep this where it is or we can discuss changing the funds either within Prudential or to another provider to match your current risk rating and investment objectives.
Canada Life Bonds
You inherited £90,000 and you state that you have invested this in a bond with AVIVA but we are unsure of what the current value is in today’s terms.
Advice discussion
You were not sure what you wanted to do with this investment.
If you could send me a statement, I can then identify the return on investment in today’s terms.
We will look at your objectives and see if they are in line with this type of product and provider.
Again, I could then recommend an investment strategy to offer you better returns with low risk or indeed advise you to leave them where they are.
Paid up endowment
Your endowment policy has matured and paid out £39,500 which is in your bank account.
Advice discussion
We agreed that you should keep this where it is as this will cover the costs of purchasing your new home.
Based on a purchase price of £650,000, stamp duty alone will be £22,500, so with moving costs these funds will be used.
Your financial priorities
Having attended a discussion/fact find meeting I would normally be taking some form of direction from my client. At this time, we have gathered information and now I fully understand your circumstances as described above. Please let me know if I have mis-understood any part of the details to date. From my experience and your answers to date I believe you have the following financial planning priorities: -
- Advice on government teachers tax free cash and where best to invest this lump sum.
- Assessing the projections, value, charging structure, returns and attitude to risk level regarding your Prudential pension and assessing all areas to improve real net growth
- Assessing the Aviva bond – as above to explore if it is fit for purpose as discussed and if a more appropriate investment vehicle and strategy can be employed
Our Fees
We charge clients for our professional services which include research, advice, implementation and on-going review services. We will charge VAT on any stand-alone advice only reports/recommendations. Implementation is transacted at an agreed % basis.
I would like to suggest the following process and charging structure to meet your financial planning needs and objectives:
Initial Fee
Our fees for any new business will be as per the generic client agreement that I provided you with at our initial meeting in terms of minimum charges and maximum charges.
Here I am being specific to you personally as my client.
Discovery £495+VAT (collation of data around the three existing investments highlighted).
Research and analysis for potential new investments £1000.00 +VAT.
Full Report prior to implementation £495+VAT.
Total prior to implementation £2388 (Inclusive of VAT).
Implementation of investments at 2% (No VAT is applicable). This is 1% discounted as you are an existing client.
If all investments are moved and reinvested the total sum being invested would be circa £393,000: -
Final salary pension tax free cash £102K
Scottish Widows personal pension plan £210K
Canada Life Bond £90K
Total investments £393K
Total 2% of £393,000 (after implementation) = £7860.00 should all investments be moved (this is the maximum charge as some may not be changed as stated above. This amount will be payable from the investment not directly.
Review of ongoing investments
I will offer you an on-going annual review service and charge you a fee as per set out in the table below with a minimum annual charge of £1000 per annum.
£75,000 - £150,000 1.00% per annum
£150,001 - £300,000 0.8% per annum
£300,001 - £500,000 0.5% per annum
Based on the total sum £393,000 that is in the investment pot currently I will receive: -
£150,000 x 1% = £1500.00
£150,000 x 0.8% = £1200.00
£93,000 x 0.5% = £464.00
Total on-going fees £3164.00
Ongoing Review Services Included
Annual Provider Statements
Annual Investment Report and Valuations
Biennial review with adviser
Annual review with adviser
Semi-Annual review with adviser
Bi-Monthly Newsletters in PDF format
Annual review of your Attitude to Risk
Review and update your Fact Find (as and when appropriate)
Inheritance tax position
In addition to all of the above areas of potential advice and financial planning and implementation – you are likely to have an IHT liability. In order to calculate this and offer solutions to the estate having to bare large tax charges I will charge £1000.00 +VAT for the advice only requirement.
Will & LPA
You have not reviewed your will and you wish for your estate to pass onto Sarah, Rebecca and your four grandchildren.
I did not ask you if you have a Lasting Power of Attorney (LPA).
This is not a regulated area of business and as such is not regulated by The Financial Conduct Authority (FCA).
Advice discussion
Review your current will which my professional will writer who can advise you in this area.
Payment
The initial fee of £2388 +VAT would be payable once you have instructed me to undertake the PRIOR TO IMPLEMENTATION STAGE of the process.
Any implementation fees would not be paid from the fund until they are fully re-invested.
Information from third parties
We will endeavour to provide the services and advice as soon as practical but are often dependent upon the provision of information from third parties. We will keep you informed of progress in the preparation of our services and advice.
The next step
Please sign and return the copy of this letter enclosed as acceptance of our terms and to enable us to proceed. I will also require all letters of authority to be signed and returned to me.
We will take your signature as your acceptance of the fees to be paid by you as outlined above.
Do let me know if you have any questions or if you would like to meet up again to fully understand the contents of this communication. We want you to be completely comfortable and happy about the arrangement and the agreement prior to entering into it.
Yours Sincerely