It was like old times when I attended a splendid LIA event at the wonderful Fota Hotel and Golf resort in May of this year, the same venue that a few weeks ago hosted a very successful renewal of The Irish Open Golf Championship.

Pat O Sullivan our LIA CEO and current president Seamus Fox and the Cork chair and one of our directors here at City Life Josephine Cussen organised what was a splendid morning full of good business ideas and plenty of old fashioned motivational stuff! Well done to all.

The speakers were Billy Walsh the Irish Boxing coach, John Murphy one time CEO of Friends First and the evergreen Tony Gordon a former president of MDRT and always a good friend to Ireland.

The most interesting part for me was when Tony talked about building funds under management and charging a fee/trail for looking after those funds for our customers.

  • Making sure that the asset allocation matched our customer’s attitude to risk and reward
  • That the managing of these assets was being done at a competitive price
  • That the business was placed with successful and proven fund managers,
  • That the portfolio was regularly rebalanced in line with attitude to risk

Tony said that financial advisors in the UK maintained that the income trail they required to make their businesses profitable was a minimum of 1% pa. As fund managers also currently charge close to 1% it means that their UK customers are paying close to 2% pa to have their money managed.

I had heard my friend Barry Woolley from the UK say this to me some years ago but I always felt it was too high a cost. Certainly at City Life for the money we have under management we don’t charge 1% in fact as I write our average annual trail of income is just under 0.5%. On average our customers pay an overall total management fee of just less than 1.5% pa

Coincidentally, when we first started building money under management in Ireland, with an income trail payable to us, the first company to agree to come on board was Friends First the same John Murphy who was CEO at the time agreed to underwrite a fairly large annual investment I was trying to place. We agreed a total annual management charge of 1.5%. This annual fee was split 50/50 between Friends First and City Life. Our first income trail was therefore 0.75% pa. That was almost 20 years ago.

I am not sure that I agree with the UK system as I think a total charge of 2% is a little too high and so what I think we will look for in Ireland is to go back to the first trail investment we set up with John with a total charge to our customer of 1.5% with half of that paid to us. I think that if we could improve our systems for rebalancing funds on a regular basis that we could have a sustainable profitable business into the future with that level of trail.

That is our next challenge, to get the fund managers/Life Insurance Companies to agree to manage the money for our customers at a maximum of 0.75% and then we will charge our customers the same so that the overall fund charge will be 1.5% pa.

I am in touch with John Murphy on a regular basis and he is now a very successful executive coach and in this capacity he interviewed a CFP from America Michael Kitces and I listened a few weeks ago to their very interesting interview.

One business concept I will share with you that jumped out at me. Michael said that it is not sufficient to simply give good financial advice, as that advice is totally useless unless our customers actually act on it.

A customer of mine died recently and yes I had life insurance cover in place to protect his widow and children. He died after a long battle with cancer. Did he have serious/critical illness insurance cover in place to pay him money when he was sick? No he didn’t.

Did I recommend it to him when he was young and healthy? Yes I did.

Did I do my job right? I think the jury is still out as I really should have been able to persuade him to take some as I am a great believer in serious illness cover and had some cover myself, and indeed made a successful claim when I was diagnosed with prostate cancer some 5 years ago.

Over the years that I have been in business I have handled many life insurance and serious illness claims. Many of these customers where there was ultimately a death claim also had successful serious illness claims before the death claim. The money they received from the serious illness cover was really important as it gave them extra money and indeed great peace of mind to fight their illness as best they could without any financial worries.

My advice to any financial advisor out there who might be reading this is very simple. I quote the words of the late great Ben Feldman who said something really fundamental at my first MDRT meeting in Radio City, New York in 1981.  He said that if we are suggesting to someone that they should take out life insurance, critical illness insurance, start a savings fund for the college education for their children or for their retirement, then we must make sure that our own house is in order first and that our financial affairs are as they should be.  If we suggest to someone that they should do something then we better have something similar in place for ourselves.

We have to speak with certainty and conviction and from a position of strength and sometimes as I know even that might not always be enough! Next time let’s try a little harder to get our customers to take out the cover they need.

Ted Dwyer Family Business  

July 2014

Ted Dwyer is the Founding Director of City Life Wealth Advisors a family business in Cork