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How much do independent financial advisors charge?

Mike Hunt

How much do independent financial advisors charge?

Perhaps your first question is, 'What can financial advice offer me?' The second is possibly, 'How much does a financial advisor charge?'

Adviser fees vary depending on what kind of assistance you need. According to our survey of customers, advice fees can range from around £500 for investment advice to £5,000 or more for some types of pension advice. Costs vary nationwide, but good advice should always be less expensive than no advice at all.

Commissions are not paid to independent financial advisers. If financial advice appears to be free, you are not working with an independent advisor but with a salesperson.

Fees for financial advisers

Depending on the services you need and the timeframe involved, your financial adviser may offer you various payment options. Listed from most common to least familiar are the types of charging structures you may encounter.

1.      Fees that are fixed

A set price will be agreed in advance for a particular service (such as setting up an annuity). The fee payable should be stated in writing.

2.      Percentage of assets

You might be charged a percentage of the portfolio's value rather than a flat fee if your adviser manages your investments over an extended period. As your portfolio grows, so does the fee.

3.      Hourly rate

It's not uncommon for advisers to charge by the hour (£150 per hour is the average rate in the UK). A charging structure like this can be helpful for small, quick jobs like moving investments on your behalf. 

Nevertheless, it would help if you were sure you get a time estimate from the adviser. During your first meeting with a financial adviser, you should discuss payment methods and fee structure to know exactly what to expect.

What do independent financial advisers charge?

Several factors can affect your adviser's fees, including the amount of advice you need, the amount of time it will take, and the size of the assets involved. Advisors generally charge between 1 and 2 per cent of an investment (e.g. a pension pot), with smaller percentages being charged for more considerable assets (smaller assets may incur higher percentage charges).

The fees of each adviser will differ, but they should be willing to discuss them upfront. Following are the averages we calculated based on a survey we conducted about the cost of typical adviser services.

  • Setting up a £10,000 investment ISA with advice - £300
  • Monthly pension contribution advice - £500
  • A guide to defined benefit pension transfers (for a transfer value of £100,000) - £2,500
  • Advice on a pension pot of £250,000 at retirement - £3,000
  • Combining two pension pots worth £500,000 - £5,000

It would be best if you took advice because it will make you more financially secure in the long run. As a result, the cost of taking advice is typically less than the cost of doing nothing.

Transfer fees for IFA pensions

The law requires that you seek professional advice if the transfer value exceeds £30,000 when transferring a defined benefit pension to a pension pot. In addition to the direction and work they provide for you, your IFA will also charge a fee that reflects the risk associated with the transfer. This decision should be taken very carefully since you are exchanging a guaranteed benefit for a non-guaranteed one.

Ongoing fees for financial advisers

If you want to manage your portfolio of investments, you may require an independent financial adviser regularly. A fee will be agreed upon in advance, which may be a percentage of the assets under management. The price for an independent financial advisor is usually between 0.25 per cent and 1 per cent. However, some advisers may charge a different percentage depending on the circumstances. Make sure you clarify exactly what service you will receive for this charge and whether it is conditional, for example.

Saving money with financial advice

You can save money in many ways by hiring a financial adviser. They can, for example, recommend pension plans, investments, mortgages, and protection products with lower administration fees, thus saving you significant amounts of money over the long run. As well as helping you save more effectively, they can alleviate the effects of tax and inflation on your money.

Furthermore, they can prevent you from making costly mistakes, such as buying the wrong financial product, losing money due to misjudgment, or falling victim to fraud.

The benefits of independent financial advisor fees

The value of financial advice goes even further as it can increase your wealth. For example, Unbiased's Value of Advice report found that those who took advice on saving for pensions near the start of their careers saved an average of £34,300 more than those who didn't.

Advice on financial matters is crucial in the days leading up to retirement and during retirement. Using it can help boost your pension value in your final years of saving and then help you create arrangements that ensure you have the right level of income in retirement while reducing your risk of running out of money. Two of the most significant benefits of getting advice are the ability to make the right decisions, as well as the sense of peace that comes with making them.

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