Financial Advice Fees

Financial Advice Fees Explained

Our guest this week is Jason Murgatroyd, Financial Adviser from CS Retirement Solutions and we’re talking about financial advice fees.

Are there rules around what financial experts can charge?

Fee structures have evolved over the years and things are certainly much better since the bad old days of endowments, where some bad practices meant advisers would recommend the products where they stood to make the most commission.

In 2012 new rules were introduced under the Retail Distribution Review which made the world of financial advice more transparent. It also created rules around fees and charging structures. That said, there still is some leeway in what companies can charge clients, so you should always check what the fees for advice will be and when they are payable.

What’s the difference between financial advisers and financial planners?

A financial adviser, generally, will find you a certain kind of financial product – an investment, a pension, a mortgage etc. Meanwhile a financial planner gives you holistic advice, looking at your whole financial situation.

For financial planning, you’re likely to have an ongoing relationship over years. At the outset your planner should be very clear with you about the fees you will pay, when to pay them and how much they will be.

A good financial planner will explain that there are different stages of advice: understanding, analysis, advice and implementation – and they will give you an idea of costs for each one.

How much can I expect to pay?

Costs can vary widely because there are so many different client scenarios and customer situations. Some are very straightforward, while other clients can be extensive, complex cases that will take much more of the adviser’s time.

Once you get to advice and implementation you will usually pay the planner a percentage fee of the money you’re investing. It may be somewhere in the region of two to three percent, but it can vary up to five percent.

There will be ongoing fees to consider as well. Typically, there are annual service charges of around one percent of the funds. Again, you should make sure you understand what you’re going to get in return.

Usually it will cover the research and preparation for an annual meeting. Your adviser should review your investments, make any adjustments to their recommendations and potentially move investments around.

Are there other ways fees can work?

You won’t always have percentage fees – there can also be flat fees. A financial adviser who’s not looking at the whole picture, and sourcing you a single product may charge a flat fee. The amount will vary depending on the type of investment.

Some advisers could propose an hourly rate, based on the amount of work that they’re undertaking for you. The most important thing is that your adviser is clear at the initial stage as to what exactly the fee structure will be and the cost involved.

Will I have to pay for an initial meeting?

No – the initial meeting with any adviser won’t cost you anything. So, this is your opportunity to ask lots of questions about the service you will get and what it will cost. Don’t be afraid to move on and speak to another adviser until you find one who you think represents fair value.

It’s all about what’s in it for you, not just for the short or the medium term. It’s looking at things long term and making sure you have a good strategy in place to give you financial freedom.

How are the fees paid on financial advice?

It’s fairly flexible and you have some say on how it works. You could just pay a fee directly, or with some products like pensions and mortgages, the fees are taken from the funds you invest. It’s down to personal preference and convenience.

For ongoing service charges,most people choose to have them deducted from the funds under management. They are taken from any growth in your investments.

Why is it important to get financial advice?

Talking to a financial professional is crucial if you want to take control of your future.

A financial adviser will help bring your options to life.

If you’ve not planned and prepared for the future, you might find that you can’t achieve all the things you thought you would – taking luxury holidays, buying a campervan, going on a world cruise, retiring at 65… Unfortunately we can’t just rely upon employers’ pension schemes to give us what we want.

Life can get in the way of planning and many people never get around to putting away the right amount of money. But with a financial adviser on your side, you can catch up every year and make sure that you’re on target. The fees are a small price to pay to achieve your future plans.

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