Yeah I've never heard of this. The other thing they might be doing is just optimizing the accounts they manage to spend less money after they take over the management of them. Optimizing bids, using negatives, and going after only highly profitable keywords could help them reduce costs and then they just keep the savings over the 5% they are guaranteeing you?

If they are still leaving the account and billing in your control, you'd be able to verify this. Did they say how the billing is handled? Either way, this sounds highly suspicious.