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Artful Lodger Leeds Property > Leeds City Guide > Financial Services > Independent Financial Advisers > How to find a good financial adviser > How much will it cost?
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How much will it cost?


Cost is most important. Broadly speaking there are two ways of paying for advice:

  • Commission
  • Fees

    However, you should not think that any advice is free. If you opt for a commission based IFA then he needs to sell products in order to justify and pay for his time. If you take nothing out he earns nothing. Consequently with commission-based financial advisers there is often an inherent pressure to sell products.

    There is nothing wrong with commission as long as you use it as part of the advice process. If you use it to offset fees you effectively own the commission and are therefore more in charge of the process.

    After choosing an IFA it is important that you take notes at all meetings and keep copies of all paperwork they send you. You should also ask for a copy of the fact find that they will complete when they are with you.

    Equally going down the fee route can be an expensive commitment. There are a number of ways that financial advisers charge fees:

  • Hourly Rate – typically £75 to £150 per hour.
  • Fixed fee for job – you arrange this with the IFA.
  • Fees with commission offset.

    If you opt for an hourly rate be sure to get an estimate of the work involved and the length of time you expect it to take. It is also sensible to put in limits as to how much work they should do before giving you a progress report.

    Many IFAs will work on an offset basis, which means that you can use the commissions to offset the cost of fees. Once again you should be careful that you do not have a contract that generates so much commission that the IFAs fees are paid on account for 20 years.If a contract pays excessive commission then you should look to have some of this reinvested into the plan to improve the investment.

    Many IFAs also work on a retainer basis whereby you pay a small amount each month (typically £20) which is used to pay for your advice as and when you need it. It would typically pay for a full review every two years so if you wanted things reviewing more often then you would pay more each month.

    Many clients have money already invested into ISAs and PEPS which generate commission without them knowing. For actively managed funds this is often 0.5% of the fund so if you have a fund of £100,000 then £500 per annum is being generated which you can use to pay someone to advise you.

    As more and more plans pay lower and lower commission then more IFAs will charge fees. This is an area which is changing all the time but a good IFA will save you far more money than they will cost.

    To summarise I would recommend that firstly you should feel happy with the chemistry and secondly to accept that there is no such thing as a free lunch!


    You might also want to consider.....

    Are qualifications needed to be a financial adviser?
    Can I trust a financial adviser?
    Chemistry? do we have to get on?
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