How much does a financial adviser charge?

Joe Phelan's picture
IFAs are there to grow your money, but how much do their services cost?
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From 2013, under new regulations, IFA fees and charges changed for the better. Prior to this date Independent Financial Advisors (IFAs) were paid commissions by pension and investment companies. This in turn was funded by the management charges these companies levy on you, the investor. From 2013, these commissions were prohibited, making investment funds’ management charges cheaper and freeing IFAs to work entirely in your interest. IFAs now agree their charges for investment and pension advice directly with you, their client. However it is worth noting that commissions may still exist in some areas e.g. Insurance advice.

Our report on Fee Based Advice shows IFAs’ fees and charges are usually broken into 3 elements:

  • Initial Advice – the first stage in the financial advice process is to understand your financial situation, your goals and risk appetite, and from there design an investment strategy. Some financial advisors offer this without charge. Others, who may go into more detail, may charge. Fees can range from £0 to £2000, so it is best to contact a few financial advisors and compare their services
  • Implementation – once a strategy is in place, an IFA will first determine what types of investments you should have, in what proportion. They will then compare thousands of investment funds to find the right one for you. Further work is required to ensure your investment portfolio is tax efficient. They will then undertake the significant administrative work required to set up these investments. Most commonly, IFAs charge a percentage of the investment for this work. This can be as low as 0.5%, and on average is 1.8% according to our research. Alternatively you should be able to agree an hourly charge (ranging from £100 to £300) or fixed fee.
  • Ongoing Service – once an investment portfolio is in place, an IFA will continue to monitor it and review it with you, as well as continue to manage all administration. Again, this is most commonly charged for on a percentage basis, with the average being 0.7% per annum. Again though, you should be able to agree an hourly or fixed fee

With all of these options, you may be able to pay the fee either directly, or request it be taken from your investments.

While good advice comes at a cost, it is important to remember the value of financial advice. By putting your financial affairs in order, IFAs can bring you financial peace of mind and make your money work much harder for you. The returns from a good investment strategy should, over time, cover your IFA fees many times over.

Moreover, financial advisors can minimise the amounts you pay to product providers by hunting out and negotiating the very best deals in the marketplace. They also benefit from lower 'platform charges' than you’ll receive if you invest directly yourself.

You can contact well-recommended IFAs through VouchedFor and ask more about their fees and services.

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