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How much should a good financial advisor/planner cost you a year?

24 November 2021

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Question by Mike

How much should a good financial advisor/planner cost you a year?


Answered by Graham Wells

This, Mike, is an excellent question and one that prompts much debate among financial planners and advisers.

The quick and simple answer might be “something in the region of 0.75% of funds invested”. So, an adviser might look after a pension valued at £150,000, an ISA worth £50,000 and, say, investment trusts of £50,000 The overall value of £250,000 x 0.75% would be £1,875 per year.

But, as ever with personal finance, there’s a lot of “it depends” and in reality, the answer is not quick and simple.

A good starting point is to distinguish between ‘financial planning’ and ‘financial advice’, as the costs for each can be quite different.

𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗽𝗹𝗮𝗻𝗻𝗶𝗻𝗴 is generally more strategic, where the planner will discuss your long term personal and financial goals in depth before going anywhere near product recommendations. This is all about your desired lifestyle and should include lifetime cashflow modelling. This will establish the likelihood of you being able to afford all your lifetime goals, based on various assumptions. To create a financial plan in the first place might typically cost between £1,000 and £2,500.

𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗮𝗱𝘃𝗶𝗰𝗲 tends to focus on the recommendation of specific products. For example, the encashment, amendment or setting up of new investments, pensions and insurance policies etc. Some advisers will offer a menu of services with fixed costs, but more often than not, advice fees are charged as a % of the value of your investments.

Note that it’s possible to use the Boring Money search facility to find advisers who operate on a ‘fixed £ fee’ basis. It’s also worth exploring various websites and asking for local recommendations to get a sense of different charging structures.

Many regulated advisers will provide both financial planning and advice as an ongoing package. The annual cost will typically fall between 0.5% and 1% per annum. It varies depending on the value of your assets and complexity of your situation.

You asked about the cost of a ‘𝗴𝗼𝗼𝗱’ financial adviser or planner. I would argue that creating a financial plan comes first, followed by advice, if required. It’s possible to create a financial plan without the cost of ongoing, regulated advice and some financial planners will offer this for a stand-alone fee.

Financial coaching is also becoming more established as an option in the UK. Combined with information sites like Boring Money, it opens up opportunities for those who want to become empowered to manage their own money, or perhaps, don’t yet feel ready for regulated advice.

So to summarise, Mike, the cost per year depends on the type of help you value most, and usually, the amount of money you already have available to invest. Not a quick answer, but I hope it helps!

Graham

Answered by

Graham Wells

Financial Coach & Chartered Financial Planner

I love helping individuals and couples to develop financial knowledge, self-awareness and make bold, exciting plans for the future.