Is paying for financial advice worth it? - Times Money Mentor (2024)

Financial advice isn’t just for those with buckets of money, complex tax situations and offshore accounts. Find out how much it costs, what you can get help with and if it could be right for you.

Making the correct financial decisions for your future is vital, but can be difficult to do alone. A financial adviser could help you plan for your retirement, invest to grow your money or help you understand your goals and keep you on track. People who receive financial advice are better off in pensions and financial assets by nearly £48,000 on average, according to research from the International Longevity Centre (ILC).

It is important to find someone that you trust. Financial advice is a long-term commitment that costs money and poor guidance can cost you a lot in the long run.

In this article, we explain:

• What is financial advice?
• Who needs financial advice?
• How much does financial advice cost?
• The £1,500 tax break for financial advice
• How can I find a financial adviser?
• What do I do if something goes wrong?

Read more: Best mortgage brokers in the UK

What is financial advice?

Financial advice is not the same as guidance, which can be found on this website or provided free by charities and other organisations.

There are different types of financial advice that you can seek:

• Charteredfinancial planner
  • A professional will look at your entire financial situation, help you define your short and long-term goals and find the best way to achieve them
  • Regulated by the FCA
• Independent financial adviser
  • Similar to a financial planner, but tends to focus on a specific financial issue, for example, pensions or investment
  • Offers advice about a range of products from all the different companies on the market
  • Regulated by the FCA
• Restricted advisers
  • Similar to an IFA but can only recommend products from one provider, a limited range of providers or have one specific area in which they specialise
  • Regulated by the FCA
• Financial coach/financial guidance
  • Offers general information so you have the knowledge and tools to make your own money choices
  • Unregulated

Being authorised and regulated by the Financial Conduct Authority (FCA) means that if something goes wrong, you can complain to the Financial Ombudsman Service.

NOTE: Sometimes a financial adviser isn’t actually called a financial adviser, particularly if they only work in one area. So you may speak to a “mortgage broker”, “investment adviser” or “pension adviser”.

Find out more: Should I use a mortgage adviser?

Who needs financial advice?

Financial advice is not just for the wealthy, but for anyone who has financial goals or a specific need and isn’t sure what is the best way to meet it.

You might benefit from speaking to a professional about any number of financial issues in your life, including:

• Buying a home or taking out a mortgage
• Later-life planning such as figuring out how much you need in retirement
• Planning for your children’s future
• Reducing your tax bill
• Investing
• Getting divorced
• Changing careers
• Life insurance
• Knowing what to do with a lump sum, such as an inheritance or redundancy payout

Financial advice will cost you money. But if you aren’t confident about making financial decisions yourself and don’t have the time to scour the market for the best products, it could be a wise investment.

How much does financial advice cost?

The cost of financial advice depends on a number of factors, including:

• What you want the advice for
• How complex your financial situation is
• The charges set by an individual adviser

The average cost for a financial adviser is £150 per hour, although it can vary from £75 to £350 per hour, according to the Money Helper advice service.

Paying hourly isn’t the only way to pay for financial advice. There are a number of options:

• Hourly rate
• Monthly fee
• Flat fee
• Fixed charge for a set service – ie for arranging a mortgage or setting up an annuity
• Percentage of the money you want to invest
• Ongoing fee – for a longer-term service

It depends on what you want financial advice on.

For example, according to adviser directory Unbiased:

• To advise and set up an £11,000 stocks and shares Isa will cost an average of £450

• A financial planner starts at about a £1,500one-off fee, plus extra if you chose to have financial check-ups in the future

How much do financial advisers charge for pension advice?

The cost of financial advice for pensions can vary greatly. As a guide:

• The average adviser will charge £3,500 to set up a drawdown scheme on a £300,000 pension pot
• For at-retirement advice on a £250,000 pension pot you’ll pay approximately £3,000
• For help consolidating pension pots with a total value of £500,000, expect to be charged £5,000
• Transferring a defined benefit pension valued at £100,000 costs £2,500
• One-off advice on a £300-a-month pension contribution costs £500

(These figures are from Unbiased, the adviser directory.)

The Pensions Advice Allowance

The Pensions Advice Allowance allows you to take £500 out of your (defined contribution) pension tax-free, and you can do this three times before you reach the age of 55 if you use it to put towards financial advice.

It’s a canny way to access advice about saving for retirement at different stages in your life as your priorities and goals change.

If you want to use this, contact the pension scheme. Withdrawing money early from your pension normally results in an unauthorised payment charge (usually 55%) but not when it’s taken out via the pension advice allowance – so make sure you contact the pension scheme first.

Can I get free financial advice?

You cannot get free advice, although many advisers will offer an initial face-to-face meeting for free. You will only pay if you decide to work with them going forward.

One financial advice firm, Kellands, is offering all of our readers a free hour-long session with one of its independent financial advisers. They will listen to your financial goals and help you take the first step to achieving them.

Sign up for a free session with one of Kellands’ advisers using our link*.

In the past, financial advisers could offer their services for “free” because they could earn their money through commission. By recommending a company’s product to you, that company would pay them money.

The rules changed in 2013 so that IFAs could no longer charge commission; instead, they must offer upfront fees to clients.

It is possible to get free general financial guidance from a number of organisations, including:

• MoneyHelper
• Citizens Advice
• National Debtline
• Money and Pensions Service

People aged 50 or over can also use the government’s free Pension Wise service, which includes an appointment of up to an hour with a pension specialist.

How do I find a financial adviser?

1. Know what advice you are looking for

You need to ask yourself why are you looking for financial advice in the first place:

• Particular event, such as buying a house
• Specific financial query, such as where to hold your pension or investments
• General financial planning

Knowing what you want will help with narrowing down your search.

2. Do your homework

Not all financial advisers are created equal and not all will charge the same amount:

• Make sure you shop around
• Compare prices to get an idea of what you should be paying
• Ask friends and family for their recommendations

Unbiased and Vouchedfor are good places to start to find a financial adviser.

But you could also try:

• Chartered Institute for Securities & Investment (CISI)
• Society of Later Life Advisers
• Personal Finance Society

3. Check out their qualifications

All financial advisers must have:

• Level 4 or above of the national Qualifications and Credit Framework
• Hold a Statement of Professional Standing (SPS) – meaning:
  • they have signed up to a code of ethics
  • they have completed at least 35 hours of professional training each year to keep up-to-date with changes in the industry and regulation
  • they have renewed their SPS certificate, as annual renewal is required – so check your adviser’s is up-to-date
• Registered with the FCA

4. Ask lots of questions

Don’t be afraid to ask lots of questions before you agree to use a financial adviser so that you have a clear idea:

• Exactly what the process will be
• What they can offer
• How much you will be charged

Remember, this is someone with whom you are entrusting your personal information and financial dreams, so make sure you are comfortable with the relationship.

Many of the initial meetings are free, but don’t feel obliged to sign up with that adviser. Trust your instincts; it’s okay to walk away.

5. Sort out payment

Do you want one-off advice or ongoing support? Are you happy for your adviser to take a cut of your future earnings from your portfolio, would you prefer an upfront fixed cost or are you happier with paying ongoing charges?

• Find a way to pay that best suits you
• Make sure you receive a copy of any charging structure before you sign up to anything
• If you think your requirements don’t justify the cost, negotiate the price
• Get everything down in writing, including the products recommended

What can I do if I am unhappy?

You can complain. Your adviser needs to take a number of factors into consideration before recommending products to you, including:

• Your goals
• Investment timeframe
• Risk appetite
• How long you want to tie your money up for
• Your tax situation
• Whether you can afford the products

If these things don’t happen, you can complain to the adviser. If their response is unsatisfactory, you can take the complaint to the Financial Ombudsman Service.

All financial advisers should be registered with the FCA. If they are not, then inform the FCA.

If you use someone who is unregistered and something goes wrong you may not be able to get help from the Financial Ombudsman.

Is a financial adviser worth it?

If you are wondering whether or not getting a financial adviser is worth it, ask yourself these questions:

• Do you have the skills and experience to manage your finances?
• Do you have time to research financial products?
• Are you happy to take responsibility for decisions that are likely to affect you and your family?

If you are comfortable that you can make these decisions for yourself, financial advice probably won’t be worth it for you.

If not, then while it may seem counterintuitive to spend money now to grow your money, a good financial adviser could enable you to:

• Fulfil your financial goals
• Reduce your inheritance tax bill
• Retire in comfort
• Stop having money worries in the future

What about a robo-adviser?

You might have heard of robo-advisers. These are online services that analyse your financial situation and make suggestions about where you should invest.

After you have answered around 10 or 15 questions, the system uses them to match you up with a ready-made investment portfolio, which could be held within a personal pension or stocks and shares Isa.

Banks such asHSBCandNatWestoffer robo-advice services, as do companies such as:

• Wealthify
• Nutmeg
• Evestor
• Moneyfarm
• Wealthsimple
• Wealth Wizards

They are a much cheaper way to invest than paying for full financial advice.

However, a robo-adviser will not be able to create a bespoke investment portfolio just for you. Nor will it be able to look at your situation in detail, deal with complex issues, or be available to meet face-to-face.

Find out more: What is a robo-adviser?