A Guide to Financial Adviser Fees

Financial adviser fees are an important consideration when seeking financial advice. You have to inquire the fees beforehand so that you determine if you’ll be able to meet the cost. It’s mandatory for all financial advisers to disclose all the costs. In fact, all financial advisers are required by the Financial Conduct Authority (FCA), as standard practice, to discuss with you the fees comprehensively before you sign a contract. The crucial thing for you to remember is that the cost should never exceed the benefits. Whatever cost the financial adviser will charge should leave you in a better position in the long term.

People have for long not understood how financial advisers make their money. Some of them charged clients by the hour. Most of the advisers in the UK had an average hourly rate of 150 pounds. Others only asked for commissions. Other financial advisers by default required you to pay a certain percentage of your investment mostly between 1% and 8% as the fees. Some financial advisers required you to pay a certain monthly retainer fee which was a flat fee or based on a percentage of your investment. Some had to be paid after the completion of a task. All in all, the fees you would pay depended on the actual adviser and your ability to pay.

After 2013, all advisers were required to desist from charging commissions especially when the advice given revolved around:

  • Pensions
  • Investments
  • Retirement
  • Annuities

Now, they all had to charge you a fee as opposed to charging a commission when advising on the above areas.

There are several determinants that influence the fee charged by a financial adviser. They include:

  • In this case, the adviser may charge more if he/she has advanced qualifications and vast experience.
  • The physical location of the office of the adviser may be in an upmarket place, hence he/she will charge highly. This is because upmarket locations will mean that office costs will be considerably high hence he/she will factor this in the pricing structure
  • Complexity of task. If the kind of advice you are seeking might involve a lot of complex work, it will inevitably require a lot of attention and time from the adviser. Thus, you will have to compensate for this time by paying a higher fee.
  • Service delivery. The manner in by which the financial advice will be delivered to you will influence the fees charged. If the advice is offered through the phone or online, the charges may be considerably low as opposed to going to an office.

Another important aspect of cost that you should take cognizance of is that there are also other fees aside from the basic ones that the financial adviser will charge. Financial products have their charges too, for example, when the adviser invests your money into a pension scheme, there are charges for you to get into the pension scheme.

Conclusively, all charges will be disclosed to you so that you know what you are paying for.

If you are considering to use the services of a financial adviser, first understand the fees that you will pay before embarking on anything else.

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