When I saw the pricing model for VouchedFor’s new Accelerator programme, my first reaction was similar to your local plumber, sucking air in through my teeth as I mentally calculated the cost.
However, as I said to some of the advisers who asked for my opinion, the initial reaction we have, especially to new concepts, is often incorrect. Therefore, the Accelerator programme deserves greater analysis.
So here goes.
Before we start, I should make it clear these are just my own thoughts having carefully considered the information sent to me by advisers and VouchedFor. The proof of whether or not the programme truly delivers satisfactory results to advisers will not be revealed for many months, even years to come.
Initially, I was keen to compare the cost of acquiring clients using the Accelerator programme with the traditional VouchedFor model. The key difference of course is that advisers pay contingently on the Accelerator programme i.e. when an enquiry converts into a client. Whereas on the traditional membership, the adviser is billed per enquiry, irrespective of whether it converts into a client.
The costs for the Accelerator programme are:
- 2% of the first £100,000 of new funds invested, with an additional 1% charged on the excess
- VAT is payable in addition, taking the effective cost for most advisers to 2.4% up to £100,000 and 1.2% on the excess
- The fees are charged on all new investments made within 18 months of the enquiry being received
- The normal VouchedFor membership fees are not charged the adviser’s participation in the Accelerator programme
- On-going adviser revenue is not subject to a charge
If an adviser is accepted onto the programme VouchedFor will aim to generate 100 new enquiries over an initial six-month period. They believe this will result in 20 new clients per adviser and tell me that the average investable assets per enquirer is £50,000 with an average cost of 1.9% plus VAT.
So, using these numbers, what’s the cost differential between the two options?
Accelerator programme: To retain 20 clients from 100 new enquiries: £22,800
Traditional membership: To obtain 100 new enquiries, which should produce 20 new clients: £7,884
That’s a difference of £14,916.
It is worth pointing out that this isn’t a completely like for like comparison, simply because it is highly unlikely a traditional VouchedFor membership would create 100 new enquiries in a six-month period. The Accelerator programme is far more likely to achieve those numbers due to the additional marketing support they will give to advisers who take part.
In many ways that gets to the heart of the Accelerator offering; if the adviser retains more clients he or she pays a higher fee.
If you would like to see my calculations to get this figure please get in touch, I would be happy to share them; email me at firstname.lastname@example.org
Who could it work well for?
VouchedFor are very specific in who the programme is target at, Managing Director, Adam Price, told me: “The Accelerator Programme is firmly targeted at new advisers, who are keen to get their business off to a fast start, and who are happy serving clients of all wealth levels, helping to address the UK’s advice gap.”
“For new advisers, it’s really important to get off to a fast start. The value of those initial clients is not in the initial fee, it’s in the ongoing charges (which could last 10-20 years or more), and future referrals, which grow in compound fashion. Quickly accelerating to a client book of 30-40 clients, each then referring more clients, can take 3-4 years off the time taken to fill a client book, and add hundreds of thousands in lifetime income.”
“Unfortunately, we wouldn’t be able to deliver this volume of enquiries with our current pricing. Similarly, new advisers ordinarily wouldn’t have the cash reserves to pay for a large volume of enquiries. However, by charging advisers more, on a success-contingent basis, we can reach new consumer groups, without creating a cash flow risk for advisers.”
“We hope that through this first pilot with up to 50 advisers, we can establish an ongoing model, that allows new advisers (or their firms) to be sure of a strong client flow, in turn encouraging many more into the profession, further helping to serve the huge population of consumers who need advice but aren’t seeking it or can’t access it.”
For advisers starting a new practice who want an initial burst of enquiries but have a small marketing budget, paying for enquiries contingently is very attractive.
The same would apply of course to advisers who want to rapidly expand an existing practice.
I can see two issues advisers would need to solve though.
Firstly, advisers are committed to taking clients with any level of wealth and with the average value of investable assets expected to be in the region of £50,000, advisers need to ensure that any on-going service provided to such clients is economically viable to deliver.
Furthermore, for most advisers the payment to VouchedFor will wipe out their initial fee and the VAT probably won’t be reclaimable. Any advisers taking part in their programme therefore need to think very carefully about the impact on their cashflow; loss leaders should always be treated with a huge degree of caution, especially if the average portfolio value is relatively low.
I have no doubt that both of these issues, which are not unique to the Accelerator programme, have solutions, but they do need to be considered carefully by advisers before they sign up.
Who won’t it work for?
There are a number of adviser segments who I don’t believe the Accelerator programme works for, including:
- Advisers who only take on clients above a minimum level of wealth; members of the Accelerator programme have to be willing to accept enquiries from clients with all levels of wealth
- Advisers with marketing budgets (and indeed the knowledge and skill to use it wisely!) sufficient to produce their required level of new enquiries
- Advisers who employ other marketing activities which produce enquiries at a lower cost
- Advisers who charge fees based on an hourly rate or who offered a fixed / capped fee option
- Advisers closer to retirement, where the lifetime value of the client will naturally be limited
You know your business, and the plans you have for it, better than anyone. You are therefore best placed to decide whether or not the Accelerator programme is for you.
Personally, I can see why advisers who want to grow their client bank rapidly and have limited marketing budgets or expertise, may well find it attractive. In fact, I have already spoken to some who plan to sign up.
I also believe VouchedFor should be praised for their innovative mindset.
Having said that, return on any marketing investment is all important and I can’t help feeling that, for advisers who have the budget and time, more could be achieved for less.
Such advisers though are probably in the minority. The answer, as always, is to put the right mix of activities in place. For new advisers, this could therefore mean combining membership of the program, to deliver accelerated growth, with more traditional marketing activities.
If you are one of the advisers who joins the programme I would love to get your feedback over the course of the next six months.