Volatile markets and changes to pensions and inheritance tax is making more people seek help from a financial adviser. But how much should you pay for advice?
Analysis of retail mediation activities returns by the Financial Conduct Authority (FCA) shows regulated financial advisers and planners are charging up to 3% for their services such as pension and retirement planning across a range of charging structures.
A financial planner or adviser can help build an investment portfolio or provide a plan for your retirement or how to leave money to your loved ones.
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This may be more important with frozen tax thresholds and the prospect of more tax hikes in the Autumn Budget.
Here is how much you should expect to pay for a financial adviser.
How does financial advice work?
A financial adviser can provide professional advice on everything from investments to pensions and inheritance tax planning.
There are different types of adviser and it is important to know the type of service you are paying for.
Of the firms providing retail investment advice in 2024, the regular said 87% provided independent advice. This means they weren’t tied to a select panel of providers.
Meanwhile 12% provided restricted advice. This means the adviser may only advise on a range of products such as investment or pensions or may just work with specific providers. This includes bank advisers who will only offer products from their employer. Financial advisers can be restricted but often this just means the providers they work with have been vetted and recommended by their own internal panels.
Some advisers provide both, according to the FCA.
The percentage of all firms that provided both restricted and independent advice was 1.4% in 2024, compared to 2% in 2023.
Advisers can charge in different ways, ranging from an initial charge to ongoing fixed fees or a combination.
This can make a big difference, especially if you have a large amount to invest.
How much does financial advice cost?
Financial adviser charges appear to be similarly whether they are independent or restricted.
The City watchdog’s figures show the typical minimal initial charge ranges from 1.% to 2.9% while the ongoing fee can be anything from 0.4% to 0.9%.
If you are paying an ongoing fee, it is important to make sure you are still being looked after.
Financial coach Philly Ponniah said: “Fees can be justified when the advice is genuinely expert and adds real value, especially in complex situations that could trigger unexpected tax charges.
“The issue is some firms charge at the top end while offering little more than an annual review, which isn’t enough for today’s savvier clients. If you’re paying ongoing charges, you should expect proactive guidance and more than a box ticking compliance exercise.”
While the cost of financial advise is easy to measure and may make some consider managing their own money, Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning, said the value you get is harder to measure.
He said: “A good adviser does far more than pick funds: they create financial forecasts, identify your ‘magic number’ for retirement, and guide you through volatile markets.
"They provide what Vanguard calls ‘adviser alpha’ — behavioural coaching, tax planning, and strategic decision-making that can add far more value than the fee itself.
“If your adviser helps you stay invested through volatility, avoid costly mistakes, and structure your money tax-efficiently, that’s value you can’t see on a statement. Clients should always know exactly what they’re paying for with a clear breakdown of adviser, platform, and fund charges and make sure that advice is genuinely moving them closer to their goals.”
