In 2012, the Retail Distribution Review abolished most Financial Advisor commissions removing the bias towards high commission products. A Financial Advisor will now simply charge a fee and in turn help you save money. In most cases, working with a good financial advisor should pay for itself several times over in the long run.
If you’re looking for assistance in managing your pension or investment portfolio, your financial advisor might charge for his advice based on a percentage of the sum being handled. Typically, 3% fee wouldn't be uncommon on an investment or pension transfer and 0.35% for a remortgage.
Flat rate fee
Some services can be charged as a fixed one-time fee: usually one-off ‘transactions’ like handling a re-mortgage, or making an investment.
Only mortgages, equity release and general insurance policies still remunerate under a commission based system. This means the financial provider pays the adviser a percentage commission for selling the policy.
Typical financial advice fee
Initial financial review - £500
Investment advice setting up a £11,000 ISA - £450
Investment advice to invest £50,000 - £1,500
Advice on £80 per month pension contribution -£500
Advice on £200 per month pension contribution -£580
Advice on transfering a £30,000 pension pot - £900
Advice on transfering a £100,000 pension pot - £2,000
Set-up a drawdown scheme on a £300,000 pension pot - £3,500
Return on investment
Although at first glance, financial advice may seem expensive, it could represent a significant return if viewed as an investment.
Let's take the a £30,000 pension pot as a mini case study for a 45 year old. If the Financial Advisor switched the £30,000 pension pot from a scheme that was charging 2% per annum to a new flexible pension scheme that only charged 0.5% per annum, (not calculating for the growth of the pension) would represent a £9,000 saving in charges alone on the principle over 20 years.
A ten fold return on the cost of the financial advice of £900 or 900% ROI.
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