How much does financial advice cost?

When considering financial advice, one of the first questions on your mind might be, “How much does financial advice cost?” In the UK, financial advice fees can vary based on the scope and depth of services, the adviser’s experience, and the type of advice needed. This post will give you an overview of the financial planning process, the types of financial advisers, what makes professional advice valuable, and the costs associated with it.

What is the Process of Financial Planning?

Financial planning begins with an initial consultation, during which your financial adviser will work to understand your goals, needs, and current financial situation. This consultation is often the starting point for developing a clear, customised financial strategy. Typically, the first consultation is free.

1. Initial Consultation: During the initial meeting, an adviser will assess your financial goals, lifestyle needs, and future plans. You also should be presented with an agreement and a generic fee structure.
2. Fact–finding: at this stage, a financial adviser will gather information about your assets, liabilities, income and expenditures. You would also complete an Attitude To Risk (ATR) questionnaire to establish your risk appetite and capacity for loss. We ask our clients to fill out an online questionnaire powered by CashCalc.
3. Cashflow Analysis: This step involves analysing your income, expenses, assets, and liabilities to project future financial needs and ensure sustainable cashflow management. Our cash flow management tool CashCalc offers comprehensive analysis and visual timelines to map and determine how you can achieve your financial goals. We are also able to conduct deterministic and stochastic modelling, as well as running simulations to stress test your cash flow plans.
4. Developing a Financial Plan: Based on the cash flow analysis and goals discussed, your adviser will create a tailored financial plan. This might include recommendations around investments, retirement planning, tax planning, or protection strategies. Your adviser will undertake careful research of products, providers (e.g. platforms) and investments to fit your needs. At Glade Financial we use the Defaqto research tool that provides a whole-of-market overview.
5. Regular Reviews and Adjustments: Financial planning isn’t a one-off exercise; it requires regular reviews to stay aligned with changing life circumstances, market conditions, and personal goals.

How Can an Adviser Help You?

A financial adviser can add value in various ways, particularly with complex or long-term planning needs:

• Expertise and Objectivity: They bring knowledge of financial markets, tax regulations, investment products, and planning strategies.
• Goal Alignment and Accountability: An adviser helps set realistic goals and keeps you accountable, often providing reminders or adjustments as needed.
• Peace of Mind: Knowing that an expert is managing your financial planning allows you to focus on other life priorities without the constant worry of navigating financial complexities on your own.

Why Consider Using a Financial Adviser?

There are many reasons why someone might want to work with a financial adviser:

• Complexity of Goals: Planning for retirement, funding education, and managing tax liabilities can become challenging without expertise.
• Customised Planning: A financial adviser can build a strategy unique to your needs, rather than using a one-size-fits-all approach.
• Time Efficiency: For those with busy lives, managing investments, tax planning, and estate planning is time-consuming. An adviser can save you time by taking on these tasks.
• Market Knowledge: Experienced advisers stay updated on economic trends and regulatory changes, ensuring your plan remains efficient and compliant.

What are the Elements of the Financial Planning Process?

The financial planning process includes several essential steps and tools, including:

• Cashflow Analysis: This is crucial for understanding current financial positioning and how money is allocated across various expenses, debts, and assets.
• Investment Strategy: Based on your risk tolerance and goals, advisers develop an investment strategy to help you reach your financial objectives.
• Tax Planning: Advisers consider strategies to minimise tax liabilities through tax-efficient savings and investment products, such as ISAs, pensions, and tax wrappers.
• Protection Planning: This could include life insurance, income protection, and critical illness cover to protect you and your family’s financial future.

Overview of Financial Advice Fee Structure

Financial advice costs in the UK typically fall into these categories:

1. Initial Planning Fee: Many advisers charge a one-time fee for creating a comprehensive financial plan, ranging from £1,000 to £5,000, depending on complexity.
2. Percentage of Assets: Initial and ongoing management fees are often based on a percentage of assets under management (AUM). This usually ranges from 1% to 5% for transactional (initial) fees and 0.5% to 2% annually for ongoing fees.
3. Fixed Fees: For specific services like mortgage advice, advisers may charge a flat fee. For example, mortgage advice may cost a fixed fee between £300-£1,000.
4. Hourly Rate: Some advisers charge by the hour, with fees typically ranging from £100 to £300 per hour, depending on experience and service type.
5. Commission–based: since 2012 (or post-RDR), independent financial advisers are not allowed to be paid commissions from fund managers. However, there are still a few product types that can pay commissions to advisers, mainly mortgages and insurance products. Your adviser will need to disclose all fees and commissions associated with the products and services they offer.

The fees need to be clearly stated and listed on the documents presented to you before you agree to the service.

Types of Financial Advisers

In the UK, there are generally two types of financial advisers: Independent Financial Advisers (IFAs) and Restricted Advisers.

• Independent Financial Advisers (IFAs): IFAs offer advice on a broad range of products across the market and must act in the best interest of clients, giving you a wide choice of financial solutions. At Glade Financial we are Independent Financial Advisers and offer whole-of-market advice.
• Restricted Advisers: Restricted advisers can only offer products from certain providers or specific types of products, which may limit the range of advice they provide.

Financial Advisers vs. DIY Investing

While it’s possible to manage finances independently, there are pros and cons to both DIY investing and using a financial adviser.

DIY Investing:

• Pros: Lower costs, full control over investment decisions, and independence.
• Cons: Requires time, expertise, and an understanding of financial products. Without professional guidance, it’s easy to make costly mistakes.

Using a Financial Adviser:

• Pros: Access to professional knowledge, tailored financial strategies, and peace of mind.
• Cons: Associated costs, although these are often justified by the value of expertise and reduced financial stress.

Conclusion

Understanding the cost and value of financial advice is essential to making an informed decision. Financial advice can simplify complex financial decisions, keep you accountable to your goals, and provide you with peace of mind. For those with busy lives or more complex financial needs, the investment in professional advice often pays off in the form of optimised financial strategies, tax savings, and well-informed financial decisions.

If you’re interested in learning more about the value of financial advice, or if you have specific questions about the cost of financial advice, consider reaching out to us for a free initial consultation.