How to pay for financial advice

How to pay for financial advice

When looking for the right financial advice, cost is one of the key factors for most people.  Good financial advice will cost you money but when it comes to taking advice on your finances it could be the best investment you make.

The average cost per hour for financial advice in the UK is about £150, depending on where you are in the country and the specialisms and qualifications of the adviser you see.  An IFA or financial adviser who helps you to review your investments or set up your pension may be happy to do this for a fixed charge for the whole job and there’s no harm in seeing if there is any room for negotiation or the ability to pay in instalments.

It’s important that you make sure you ask all the right questions about how much the advice will cost and how it can be paid for.  To help you out, we’ve prepared an adviser checklist to help you ask prospective advisers the relevant important questions and provide a place for you to make note of what the advisers tell you about their fees and services.

Here’s an explanation of the sorts of payment options you might come across:

  • Fee – the cost that a professional adviser charges for providing their services.  This is subject to VAT at standard rate.
  • Fixed fee – some advisers may be prepared to undertake a specific task for a fixed fee, such as setting up a pension policy.  Make sure you ask them precisely what is and what is not included in the agreed fee.
  • Hourly rate – where the client pays for each hour (or part of an hour) of the adviser’s time.  You should be given an estimate of how long the work will take and therefore how much you might expect to pay.  Ask if any of the work can be carried out by a more junior colleague and then signed off by a senior – to save you money!
  • Percentage of assets – often used by wealth managers who manage a portfolio of assets and investments for their clients.  They take payment for their services based on a percentage of the value of the total portfolio.
  • Percentage of mortgage - where a mortgage adviser or mortgage broker is paid at a rate equivalent to the agreed percentage of the mortgage you are taking out.
  • Retainer – in financial advice, this is similar to ‘percentage of assets’ where the adviser takes payment based on an agreed percentage of the value of the assets or by working out a time/cost basis for regular management of your financial affairs.
  • Commission – where the adviser takes payment for their services as commission from the company you buy your product from.  Under the Retail Distribution Review (RDR), taking effect in 2013, financial advisers will no longer be able to charge commission on products that can be broadly described as investments – which will include pensions, equity release, life policies, investments in unit trusts and other kinds of investment.  On some other kinds of financial ‘products’ (i.e. the things you might buy from a financial adviser like insurance or a mortgage) advisers are still allowed to be paid by commission – ask your adviser.  Click here to find out more about the changes taking place.

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