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How Much Does Financial Advice Cost?

Cost of Investing

If you decide you do want to use a financial adviser it really pays to do your research and make sure you fully understand how much financial advise costs before you commit. 

In addition to paying ongoing adviser fees there are plenty of other costs that may not always be obvious.


what is the cost of investing

For example If you have £500k to invest, a financial adviser could easily charge you 2% (£10,000) to set-up your investment and 1% (£5,000) as an ongoing yearly charge.

In addition to this you may also have to pay exit fees, platform costs, performance bonuses and product fees. Which means, when you add these all together, you could be giving away a large amount of your hard earned cash just for the privilege of investing.

So before you make any decisions ensure you are happy that your investment can absorb all these costs and hopefully still go on to beat inflation.

Of course you don’t have to use a financial adviser unless you are looking at transferring a £30k+ defined benefit or defined contribution benefit pension with a guarantee about what you’ll be paid when you retire. 

PensionCraft is here to give you the skills, knowledge and tools to control your own investments. So if you decide against going the financial adviser route, want to understand the advice you've been given or just want to learn more about investing then please join our supportive community of like minded investors for as little as £3.83*+VAT ($5) per month (Become a PensionCraft member)

What are the Different Types of Financial Advice?

Before starting out you need to decide what kind of financial advice you want and understand the pros and cons of each option. 

  1. 1
    Do you want ongoing investment advice (wealth/asset management) or just one off advice to help you set-up your portfolio?
  2. 2
    Do you want to meet the financial adviser in person or are you happy just to talk to them over the phone? Are you happy with an online only service (robo advice) or does the online advice service also need to include telephone support? If you want to find out more about the differences in approach then watch our free videos UK Investment for Beginners or Robo Advice explained by Mark Polson of The Lang Cat
  3. 3
    Do you want to use an Independent Financial Adviser (IFA) or are you happy to receive restricted advice? Restricted advice means that the person advising you is restricted to certain products that they can recommend or that they are restricted to the market segment they work in. The drawback of being restricted to certain products is that your adviser does not have access to the whole market so may not provide you with the cheapest or most appropriate products best suited to your own specific circumstances.
Where do I find a financial adviser

How do I find a Financial Adviser?

A quick Google and you can find plenty of sites you can use to search for a financial adviser but the one I liked the most was VouchedFor*.

Not only did I find this site easy to browse, but I also liked the verification and customer review aspects of it.

VouchedFor* are currently offering a free pension check and you can find this by clicking on the affiliate link above.

How do Financial Advisers Charge?

Financial advisers charge in a number of different ways, so it's critical you understand how much you will be charged and exactly what you can expect to receive before committing to anything.

Some financial advisers even charge an exit fee which can come as a nasty surprise if you decide you are not happy and want to leave.

I find it fascinating that in the UK we are not as cost sensitive when it comes to financial products and services as they are in other countries.

In the PensionCraft interview with Mark Polson of The Lang Cat he describes how it seems that in the UK the most expensive things are often the best supported and uses the wealth management company St James Place as an example. You can find our blog of this Interview in full here (Vanguard SIPP Preview

Mark Polson of the Lang Cat

Advisers often offer a free initial consultation which is an opportunity for you to ask questions, find out what they are offering, how much it costs and see if you think you would be happy working with them.

The different methods of charging are listed below but they could use a combination of any of these which also adds to the confusion. 

  • Fixed hourly fee
  • Percentage of money invested
  • Fixed price financial advice


Advisers can also benefit from Indirect charging, which means they receive commission for recommending their clients use specific products.

Independent Financial Advisers can’t get commission for recommending specific investments, products that provide income in retirement or pensions, but they can for products such as mortgages and insurance.

For services like tax advice some financial advisers may also charge a percentage of the amount they save you.

How Can I Find Out What a Financial Adviser Charges?

Financial Advisers are legally obliged to be transparent about what they charge and this is described on the FCA website as follows:


financial Conduct Authority



Advisers need to disclose all costs and charges that relate to their retail recommendations. Indications of expected (ex ante) costs and charges need to be provided pre-sale, and details of the actual costs and charges need to be provided post-sale (ex post), where applicable on at least an annual basis. These need to be aggregated, and expressed both as a cash amount and as a percentage.

In broad terms, therefore, the following must be disclosed: all one-off and ongoing charges, and transaction costs, associated with the financial instrument; all one-off and ongoing charges, and transaction costs, associated with the investment service; all third party payments received, and the total combined costs of these three categories. These disclosures must also be accompanied by an illustration that shows the cumulative effect of the overall costs and charges on the return.”

Although it is a legal requirement for financial advisers to adhere to these standards, in the 2019 review by the FCA they found that whilst there had been some improvement in the market, they were still identifying numerous problems.


How Much do Financial Advisers Charge?

A number of online resources already estimate the average prices they think people pay for financial advice.

I believe these could be misleading as the estimated prices tend to vary widely and having a price to aim for leads people down the path to think if they find someone charging the price quoted then they are not overpaying. 

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Given the service you will receive may differ so much and that there may be charges in addition to the average price quoted, I believe the best way to approach finding a good value financial adviser is to carefully shop around and negotiate on price when you find one.

According to the consumer group Which? The cost of financial advice can vary by as much as 1,000%.

According to the report published in The Sunday Times the costs quoted for someone with £100,000 in savings, a £150,000 pension pot and a £100,000 investment ISA to draw a retirement income ranged from £5,000 for the most expensive to £500 for the cheapest.

Fixed Hourly Fee

  • Moneyadviceservice quotes the UK average hourly rate as £150 with a range between £75 to £350 per hour
  • The consumer group Which? says it’s between £50 to £250
  • Unbiased quote £150 as average
  • VouchedFor quoted £180

 

What is crucial here is to understand exactly how much time you will need to pay for. If you imagine one financial adviser charges £100 per hour but charges you for three hours work and the other charges £200 per hour but it only takes one hour….

So before you commit to anything make sure you are clear what you want and get as much clarity as possible from the financial adviser about how long they think it may take. Also make sure that when you do receive the bill they give you a thorough breakdown of how they have spent their time.

Percentage of Your Assets

This is still the most frequently used method of charging which means the more money you invest the more you pay.

Some advisers do charge a lower percentage for investors with larger amounts, but you could find if you are a smaller investor that financial advisers may not be willing to take you on.

  • Which? quote the price of financial advice as an initial fee of 1% to 3% with ongoing charges of 0.25% and 1%.
  • In their December 2019 report Vouchedfor stated the average initial fee submitted to their site was 1.74%, however the submissions did range from 0.5% to 5% for set-ip with 0% to 2% for ongoing charges.
  • Unbiased says the average cost is 1% to 2% of the assets in question (less for larger investments) and an ongoing cost of between 0.25% and 1%.

Fixed Price Financial Advice

There are firms out there that charge a fixed fee for ongoing advice rather than a percentage of your investments but these tend to be tiered depending on how much you have invested and/or the level of service you get. 

I have seen prices vary greatly from five hundred to many thousands of pounds per year. Potentially investors with a large amount in investments have the most to gain from this kind of charging but again the devil is in the detail so check it out carefully.

The average amounts quoted as set fees for specific pieces of work also vary and are very dependent on your own personal circumstances as well as the financial adviser you choose. Therefore it is difficult to get a benchmark but you could look at the estimated percentage fees quoted and see how they translate.

  • In their 2019 report VouchedFor stated that for a £100,000 investment, if they combined the fixed and percentage fees uploaded to their website, the average cost over 5 years was £6,079 
  • Unbiased said it estimated £2000 to set-up a medium long term investment of £100,000.
  • Which? thought the average price was £1980 to set-up for an investor who was 50, had no mortgage and already had comfortable savings

It's difficult to draw any meaningful conclusions from the information out there as an individual's requirements can vary so greatly. If you are in doubt about whether you are getting value for money or not then ask the financial adviser to go through exactly what they are going to do for you and how much time it will take them.

  • Unbiased quoted £800 for someone with £50k+ in total assets including property to get a financial plan with a financial adviser.
  • VouchedFor says a financial plan for someone who simply wants clarity on their goals and to know whether they are on track for retirement, might range from £0 to £500.  
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How Can I Reduce the Cost of Financial Advice?

Employers can pay for financial advice for their employees without paying income tax. The current threshold for this is £500.

If it’s pension advice you are after then the Pensions Advice Allowance means that you may be able to take £500 once a year and up to 3 times in total from your pension pot tax free to pay towards the cost of financial advice. 

There are some free services that can provide you with information and allow you to talk through your options but these provide information and guidance not advice. Some of these are:

Also it goes without saying shopping around can save you money but also when you do find someone you want to work with do try and negotiate the fee as you might find you can save even more money this way.

Checklist to Help You Choose a Financial Adviser

Financial Adviser checklist
  • Check they are registered by the Financial Conduct Authority (FCA)? You can check this at the FCA register
  • Make sure you understand all the set-up and ongoing costs as well as checking for any exit penalties.
  • Make sure the financial adviser you choose has experience in giving the type of financial advice you require.
  • Look for client reviews and ask if they have any clients that would be happy to speak to you.
  • Check what qualifications they have - Financial advisers must have a minimum of Level 4 of the national Qualifications and Credit Framework and a Statement of Professional Standing (SPS) which must be renewed annually.
  • Make sure you understand whether they are an Independent Financial Adviser (IFA) or are a Restricted Adviser who will only be able to offer advice and make recommendations on a limited number of products.
  • Make sure you understand the service they will be providing and that you are happy with the quality and scope of what they are offering


*Links marked with * are affiliate links and we may receive a small payment if you choose to use them. Affiliate links help to support PensionCraft to produce free content, but they do not influence our views regarding the services and products we talk about. Remaining impartial is of the utmost importance to us and we will continue to include links to any resources we think you may find useful.

**Correct at January 2020

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February 14, 2020