How much does financial advice cost?

You might not think you need financial advice unless you have lots of money or a number of assets to your name. However, financial advice can add value to a range of life's decisions. So how much does financial advice cost and how can it add value?

Angela Kerr Director, Editor

How much does financial advice cost?

If you’re wondering “how much does financial advice cost?”, then you should know that many independent financial advisers will start by offering a free initial consultation to see if they’re able to meet your needs. You’ll be able to chat through your situation, the services they offer and your adviser’s areas of expertise to see if you’re a good fit. But if you want to proceed with a particular service, such as receiving advice on the most suitable pension, you will have to pay a fee. But good advice should always cost less than no advice at all.

According to Unbiased, a recent customer survey found that advice fees can be anything from around £500 for investment advice to £5,000 or more for some kinds of pension advice.

There are three main ways you will be charged: by fixed fee, a commission/percentage or an hourly rate.

Types of financial adviser fees

There are lots of types of financial advisers and a number of different fee structures. Here are the three most common:

1. Fixed fee

Some advisers simply charge a fixed fee for set services. This is common for relatively straightforward tasks, or when you need one-off advice. You should get the fee confirmed upfront in writing to ensure you only pay exactly what you’re expecting.

2. Percentage

Other advisers charge an average of the amount invested.  The Financial Conduct Authority (FCA) says advisers charge an average of 2.4% of the amount invested for initial advice and 0.8% a year for ongoing advice (1.9% p.a with underlying product and portfolio charges factored in).

3. Hourly rate

If you need to sit down with your adviser for a chat or carry out a quick service, they may charge a one-off hourly fee. The current UK average is £150, but fees can vary depending on your location, the task in question and the number of years of experience your adviser has and how complex the matter is. Fees can range from as low as £75 to £350 or more.

How much does financial advice cost? Here are some examples

Though the amount you pay will depend on your circumstances and the adviser you choose, all advisers should be happy to discuss their fees up front.

Based on a survey of Unbiased’s customers, here’s an idea of what you can expect to pay for the following services:

How much does financial advice cost?

Can I get free financial advice?

In the past, some types of advisers were able to brand their services as ‘free’ as they would receive their income from commissions. For example, if an adviser was tasked with recommending and managing an investment portfolio, they could earn commission by guiding their clients towards certain companies or funds.

While this didn’t cost the customer anything, it meant that the advice they received was biased in terms of the most attractive commission for the adviser, rather than based on which investments were genuinely best for the customer.

However, since 2013, all types of financial advisers must charge upfront fees. Now, for example, if an IFA was tasked with managing an investment portfolio, they may take 3% of the value per year as their fee, rather than earning income from the fund companies. This means that it’s much easier to find a genuinely unbiased financial adviser and get a clear picture of the cost of advice.

How to pay for financial advice

There is some assistance available, especially when it comes to pensions. The Pensions Advice Allowance payment is intended to allow members and beneficiaries of defined contribution pension schemes and hybrid pension arrangements with cash balance benefits or other money purchase benefits to take £500 from their scheme to redeem against the cost of retirement financial advice, without incurring an unauthorised payment tax charge.

Are all financial advisers unbiased?

No. Some offer ‘limited market’ advice, which means they advise on products or services from a certain company. They will still offer genuinely helpful advice and aim to find the best solution for you, but you may miss out on a better option from a different company. To find the best deal, work with a whole of market adviser, who will evaluate a larger pool of options from multiple providers.

With more than 27,000 expert, regulated advisers, our partners at Unbiased match you to the right adviser. Pop in a few details to get you the right match and book your free initial consultation.

How an IFA can pay for itself?

Though their services aren’t cheap, you’re likely to find that an IFA’s advice pays for itself in the long run. For example, seeking advice about an investment property could help you understand the most tax efficient way to enjoy rental income or capital gains from price appreciation when it’s time to sell.

Gaining a proper understanding of your current and future finances will ensure your money is going as far as possible. Without expert advice, most people don’t have the confidence to move their money out of savings accounts with poor interest rates, or lose more than they should by paying extortionate interest rates. An adviser could show you how to give your money the chance to grow into a healthy pension pot or an education fund for your children.

Financial advice can complement legal guidance and help to ensure you’re making decisions that make good legal and financial sense. So if you’re planning on doing something that will impact your finances, regardless of whether you’ve got £10,000 or £10 million to your name, it’s sensible to speak to a financial adviser first.

How much money do I need to get financial advice?

In short, less than you may think. Even if you can’t commit to an ongoing management service, even a one-off session with a financial adviser could actually save you money.

To see how an independent financial adviser can help, find a local adviser and book your free initial consultation through our partners at Unbiased.