How to make sure you’re not paying too much for financial advice

Family with financial adviser © Alamy
How detailed do you want the advice to be?

Finding suitable and cost-effective professional help with your finances is hard work

Fail to shop around when looking for financial advice and you could end up paying £4,500 more than you need to. New research by Which?, the independent consumers’ organisation, has revealed that the cost of financial advice can vary by as much as 1,000%, proving that you need to compare several independent financial advisers (IFAs) before making an appointment.

Which? asked 108 advisers what they charged for a variety of scenarios. On one occasion, “a woman approaching retirement and wanting advice on drawing an income was quoted £500 for advice by the cheapest adviser – and £5,000 for the most expensive”, says Kate Palmer in The Sunday Times. Advice for a young parent looking to save for their child’s university education varied from £300 to £2,500.

“Shop around,” says Jenny Ross, editor of Which? Money. “Look for a personal match as well as a decent price.” Trying to compare advisers is “notoriously difficult”, says Palmer. Prices will vary depending on more than simply location and reputation. Your own circumstances will also be a factor: how much money are you investing and how detailed do you want the advice to be?

“These fee comparisons usually miss out on a lot of key information,” Ricky Chan, director of IFS Wealth & Pensions told FT Adviser. Some services may include a review of underlying products and investment strategy, for instance, while it is not always clear whether implementation fees come on top of the advice report fees.

Of the advisers surveyed by Which?, 70% said their charges were worked out in proportion to the amount of money they were being asked to manage. Six in ten said they charged a flat fee and 6% charged by the hour. Some offered a mix of all these fees.

Is the advice restricted?

You also need to understand whether the advice you are getting covers the whole market or whether it is “restricted”, in which case an adviser can only recommend specific products to you. This is usually because they work for a bank or wealth manager and can only advocate their products.

Additionally, “many advisers do not publish their fees, so you will need to speak to a few before making a decision”, says Palmer. An initial meeting should be free and provides an opportunity for you to assess if the adviser offers value for money.

“Before accepting any advice, make sure you understand what is being recommended to you, and that you are happy with what’s on the table before going ahead,” says Ross.

You can find a list of IFAs in your area on unbiased.co.uk. You should also check the Financial Conduct Authority’s (FCA) register to make sure they are authorised and regulated by them.