How much does a financial adviser cost and do I need one?

Rachael Oku

by , Team PensionBee

at PensionBee

21 Feb 2018 /  

Feb 2018

How much does a financial adviser cost and do I need one?

Making confident decisions about your pension and investments is never easy. Yet with more freedom and choice than ever before there’s a lot of pressure to get it right. As you near retirement understanding your options becomes increasingly important, for the decisions you make now will have a lasting impact on your finances.

If you find getting to grips with your pension a struggle, independent advice could help ensure your pension is setup in a way that’s easy to manage and achieves your retirement goals. Yet when you consider the costs involved, is it worth seeing a financial adviser, or could you do some of the work yourself?

What is a financial adviser?

An independent financial adviser (IFA), is authorised by the Financial Conduct Authority (FCA), to offer impartial advice. An adviser will ask you a series of questions to find out your financial health, knowledge of the pension landscape, retirement goals and attitude to risk. This will help them provide specialist pension advice on the full range of products on the market, and recommend the best options to suit your needs.

An IFA can help you calculate when you can afford to retire and recommend the best way to access your pension funds. And, if you have several workplace pensions, they may recommend consolidating your pensions into one single plan.

Things to consider when seeking financial advice

  • Average cost of a financial adviser

Independent financial adviser fees will vary depending on the advice you need, and how you choose to pay for it. The majority of advisers will offer you a free consultation, but if you decide to meet again the cost can be as high as £500 for an initial review.

There are three ways to pay for financial advice. You can pay a fixed fee for a specific service, such as purchasing an annuity, or you can pay an hourly rate. Hourly rates range from £75 an hour to £350, with an average of £150 an hour.

Hourly rates range from £75 an hour to £350, with an average of £150 an hour

If you’d like an adviser to help you manage your investments on an ongoing basis, they may charge a percentage of assets rather than a fixed amount. This means they can command a percentage of your portfolio’s total value, anywhere from 0.5% to 5%.

If you’re looking for high level advice on managing your money more efficiently, and have a healthy pension, it’s unlikely that paying a percentage of assets will be cost-effective. Before you retain the services of a financial adviser you should ask for a written breakdown of their fees and find out what’s included in the costs. You may find that the cost of financial advice changes based on where you’re located in the UK.

  • Restricted advice

Some financial advisers will only offer solutions based on certain products or specific providers, which makes them restricted in the advice they can give you. A financial adviser has to inform you whether they are independent or restricted so you should always ask.

In order to receive advice that’s genuinely best suited to your personal circumstances you should always seek the help of an independent adviser.

The benefits of financial advice

  • Receive a personal recommendation

One of the best things about independent financial advice is the personal recommendation you’ll receive. An IFA will be able to offer guidance on how you can convert your pension pot into a sustainable retirement income, and how best to manage your money moving forward. If you have several pensions an adviser can help you streamline your funds by unlocking old pensions on your behalf.

  • Learn how to protect your retirement funds

If you’re the first to admit that you don’t know a thing about your pension, an independent financial adviser can help you understand the basics. They can educate you about all of the products across the pension landscape and explain the different types of funds, and the risks involved to ensure you don’t make costly mistakes.

  • Get your pensions back on track

If you have pensions here, there and everywhere and find them hard to manage – an IFA can help you get them back on track. They can breakdown how much you’re spending in fees and will recommend measures and products to help you better manage your money.

Do I need a financial adviser for my pension?

While there are many advantages to enlisting the help of an IFA, paying for advice isn’t always going to be worth it. If you have straightforward needs it’s possible to do some pension planning on your own.

If you’re unsure how much you should be saving for retirement, for example, our pension calculator can give you a good indication. Elsewhere, our Pensions Explained centre will help you find out everything you need to know about paying into a pension, taking a pension and all the pension rules and legislation - plus anything else in-between! What’s more, the money you save in adviser fees can go straight into your pension fund.

The money you save in adviser fees can go straight into your pension fund

When you sign up to a PensionBee plan we’ll help unite all of your old pensions into one manageable pot and will take care of the transfers for you. It’s easy to manage your money and measure your progress against your goals through our online dashboard.

In some more complicated circumstances financial advice is recommended. If you’d like to mix your pension options and get an annuity and adjustable income, for example, guidance is advised.

You’ll be required by law to seek advice if you have a ‘final salary’ or defined benefit pension worth more than £30,000 and want to transfer it to a defined contribution pension scheme.

How to choose a financial adviser

If you decide that you’d like to speak to a financial adviser there are several online directories that can help you find professional advice. If an adviser is regulated by the Financial Conduct Authority it will be included on its free register of authorised individuals, firms and bodies.

The Money Advice Service has a similar directory for those seeking independent pensions advice.

Have you used a financial adviser? How did you find the experience? Tell us in the comments section at the bottom of the page 👇

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