Is 1% a 'normal' charge rate for financial advice or excessive?
01 April 2021
Question by D
I have just retired and am reviewing my costs for financial advice. The company I have been using for the past few years charges 1% of all the money they invest on my behalf, which is on top of charges for the investment. So for a £200,000 investment via a bond, I've paid around £21,000 over 7 years. I now have more money to invest, but I'm wondering if I'm paying over the odds for the financial advice with a 1% rate. Can you advise if this is a 'normal' charge rate or excessive? Thanks
Answered by Clinton Askew
This is a great question. The answer is it depends.
The reality is that any adviser charging 1% just for asset management is burdening you with a cost where you can access the outcome at much lower cost. Whilst asset management is not entirely a commodity it is important to recognise that investors can, with relative, ease access a market portfolio at a cost between 0.25-0.30%.
However, accessing a market portfolio is only part of the value equation. Capital gains tax harvesting, rebalancing, tax optimisation, capital protection and other ideas such as estate planning and effective charitable giving all form the services that advisers provide and that is often what is included within the 1%. It is also worth remembering that we are all human and one of the benefits of any adviser is to stand between you and a dumb decision and for them to encourage or advise you to make smart decisions. All of this has great value that is way beyond the 1% cost. As the old phrase about cynics says, you can know the price of everything but the value of nothing, so decide if the range of services your receive is more than asset management and if it is isn’t then seek lower costs elsewhere.
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