According to a new website that looks at the fees charged by financial advisors, you can realistically expect to pay around £150 – £175 an hour for advice on how to invest your money. My experience is that the fees are significantly higher than that. You will notice that very few financial advisors are prepared to quote their fees on their website.
Since regulations introduced in 2012 came into force, financial advisors are no longer allowed to receive commission from companies they recommend. This is an attempt to ensure better advice for their clients. As a result the financial market is now looking for a different model of remuneration.
Unbiased.co.uk says that most financial advisors are now asking for “project fees” rather than basing the work on an hourly basis. The company say that advisors typically charge £500 for a financial review and around £350 to set up and advise on, say, an £11,000 investment ISA.
Are financial advisors worth their fees?
One of the biggest problems with using advisors is not the initial fees they charge. It is the ongoing fees for maintaining the service year on year. These are often far greater than the set up fees themselves.
Fees of 1% a year are quite commonly demanded and will rapidly erode the returns you were hoping for on your hard earned savings. In particular I dislike the idea that the fee is based on how much money I have managed to stash away for my retirement.
When my plumber comes round to fix my boiler he doesn’t charge based on my annual income or the value of my house. He charges a set fee based on the time the job takes and the bill stops there.
I can see no reason why a financial advisor should be paid a higher amount of money simply because I have had the prudence to build up a significant cash pile and pension. I am prepared to pay for his time based on a reasonable hourly rate (and you will have to decide whether £150 -£170 an hour is reasonable) but I for one am not prepared to pay fees based on a percentage of my wealth.
At least when my Corgi qualified plumber rocks up I know that he will deliver a quality service – when it comes to IFAs I am yet to be convinced that many of them are worth the fees that they claim could ever be described as “reasonable”.