How much is financial advice? This app knows!

First published 25 March 2019 • Updated 13 March 2019

If you’re choosing a financial adviser, you may be wondering what sort of fees to expect. This Unbiased guide explains how advisers price their services – and also introduces a brand new online tool for checking the cost of advice. Article by Nick Green.

What is the cost of advice?

What is the cost of financial advice? A lot depends on what kind of advice you’re after. But if you’re seeing a financial adviser for the first time, you might not yet know what services you’ll be needing from them. For this reason, it can be hard to estimate likely fees until you’ve had at least one meeting.

Fortunately, most financial advisers won’t charge for their initial meeting, and will provide you with fixed quotes for any work you ask them to do for you. You can also get a good idea of what to expect if you understand the different kinds of advice and how advisers charge for them. This guide will help you do that.

The different types of financial advice

No two financial advice sessions are the same, since advice is tailored to the individual person. However, most advice falls typically into one of seven key areas, as shown here.

Types of advice

Examples

Pension saving

 

  • Setting up a pension pot and advising on a regular contribution

 

Investing

 

  • Setting up an investment ISA
  • Creating a medium-term growth investment strategy

 

Pension planning

 

  • Combining several pension pots from different providers
  • Advice on transferring a defined benefit pension
  • Advice on maximising pension savings 10 to 5 years before retirement

 

Protection

 

  • Setting up life insurance policies
  • Arranging critical illness or income protection cover

Accessing pensions

 

  • Setting up a drawdown scheme
  • Buying an annuity
  • Full at-retirement advice and execution

Releasing value from your home

 

  • Advice on equity release

 

Long-term care planning

 

  • Creating a care funding plan for an individual aged 80+

 

The advice you receive may consist of just one of these areas, if you have a specific enquiry – or it may combine several areas as part of a wider financial plan.

How do financial advisers charge for advice?

In most cases your adviser will quote a simple up-front fee for any work to be done. In some circumstances (e.g. ongoing portfolio management) they may charge on a different basis, such as a monthly retainer or an hourly rate. Whatever the arrangements, they should always keep you fully informed about what you can expect to pay.

The amount charged will depend on three things: the type of advice, the level of risk involved, and the size of the assets being advised upon. So for example, advice on combining two small pension pots may involve relatively low risk and low-value assets – so should cost much less than transferring a large defined benefit pension (high value and high risk).

There is however a useful rule of thumb for estimating the cost of advice. The average adviser’s fee is generally between 1 and 2 per cent of the asset’s size, while the larger the asset, the smaller the percentage. So advice on accessing a £500,000 pension pot might be closer to 1 per cent of the pot (e.g. £5,000), while the same advice on a £50,000 pension pot might be nearer 2 per cent (e.g. £1,000).

For a more accurate idea of advice fees, you can use our smart Cost of Advice tool. This calculates an estimate for your specific advice request, based on analysis of hundreds of real-life adviser charges. All you have to do is enter the type of advice you want, along with the asset size, and the tool does the rest. Try it now!

Try our Cost of Advice tool

What are the benefits of financial advice?

By definition, good financial advice should do at least one (if not more) of the following:

  • Improve your finances by more than the cost of the advice
  • Reduce your risk of financial loss
  • Ensure you have financial security when you need it most
  • Save you time, effort and worry, and minimise mistakes

Here some of the specific instances in which advice can leave a person better off.

Pension saving

People who take advice when setting up a pension generally contribute an average £71 per month more into their pot. Research has shown that over time this can net an extra £15,000 in interest and tax relief alone.

Investing

The input of a financial adviser can help you maximise the returns on your capital, while avoiding many pitfalls that could be very expensive.

Accessing your pension

There are many different ways in which you can draw your pension, and countless different products to choose from. Decisions made when you retire may be irreversible and can impact the next 20 to 30 years, so it’s vital to get them right.

Supporting your family

Advice can even improve your family life. Disputes over money are one of the biggest causes of marital strife, while raising just one child can cost as much over 20 years as a mortgage. Having unbiased advice from a professional can help couples reach agreement.

These are just a handful of the ways in which a financial adviser can provide real value for money. Ultimately, the greatest benefit may simply be peace of mind, in knowing that you have made the best available choices for yourself and your family.

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About the author
Nick Green
Nick Green
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.