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How much does a financial advisor cost

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  • Financial Advice
  • Posted date:
  • 05-08-2019
How much does a financial advisor cost

Decisions involving money are often sensitive, particularly when it comes to investments and pensions. Things get even trickier when you are retiring because it's a time when financial mistakes aren't tolerable. 

To save yourself the trouble of dealing with all this pressure, it makes sense to seek help. No one fits this role better than an independent third party financial adviser. Of course, their services will come at a cost, but you stand to gain far much more.


HOW FINANCIAL ADVISERS EARN THEIR MONEY

Before 2012, the law required independent financial advisers (IFA) to receive payment from clients through either commissions or fees. The law changed in favour of clients as of December 2012, banning IFAs from receiving commissions on products like pensions and investments. Financial advisers are instead required to negotiate with clients on a fee regarding services of such nature.

However, you can pay commission to financial advisers indefinitely for services involving income protection, critical illness, mortgage broking, or insurance policies. It may come across as a free deal, but you are simply feeding their bank accounts with your money. This can lead to even higher fees because you will be paying long term rather than upfront.

THE FEE'S AND YOU

How much you pay for the services rendered by an IFA is determined by the method of payment you agree with them:

  • Flat fee
  • Hourly fee
  • Commission

Usually, no consultation costs are involved with most financial advisers. However, you should confirm any costs associated with consulting; otherwise, depending on the adviser you will be working with, you will be paying them through:

FIXED FEES AND YOU

If you only need the adviser for specific projects, or during particular times, this option is ideal for you. The fees are charged whenever you visit the adviser for various projects such as, investment or consolidating your pensions. 

PERCENTAGE FEE

Because this approach is similar to the commission system, most advisers are inclined to it. It involves paying the adviser a percentage of the money they will be helping you manage. However, there is an initial percentage fee involved, from 0.5% to 5%, for you to become a client. Subsequently, you will be paying the agreed percentage (main fee) each year the adviser helps you with your finances.

HOURLY CHARGES

This method is not different from how accountants charge or other services that involve hourly rates. It can get expensive, ranging from £50 to £250 an hour, so you need to be careful with advisers that endorse it. To be safe, ensure that the adviser indicates and justifies each expense by stating the work done and time spent.


Paul Dodd Asset Management Limited is committed to providing independent financial management throughout Leeds and North Yorkshire. If you need to speak to our financial advice specialist today, please get in touch to discuss the ways that we can help you.