What Does Professional Advice Cost and What Do You Get?

Advisers charge in a few different ways:

• A percentage of your money. Figures from the Financial Conduct Authority, the City watchdog, show the average initial advice fee is around 2.4% of the amount involved.
• A fixed fee. Many advisers now quote a set price for a specific job, such as “invest this £50,000”. This is often cheaper for larger sums.
• An hourly rate. Useful for a quick review or a second opinion on a plan you’ve already made.

Little-known nugget: you don’t have to sign up for ongoing advice. Many advisers will suggest an ongoing service too, typically costing around 0.8% of your money every year. For a one-off lump sum, you can often ask for one-off advice only. You get a recommendation, put it in place, and that’s it. Always ask whether this is an option before you agree to anything.

Little-known nugget: your pension might pay for it. Many pension schemes let you take up to £500 tax-free to pay for financial advice, up to three times, once per tax year. Here’s how the £500 pension advice rule works.

Here’s a quick way to think about it. Imagine an adviser quotes a fixed fee of £1,500. That’s a very different deal depending on how much you’re investing:

On £10,000, you’d need a lot of extra growth just to stand still. On £250,000, the fee is small next to the size of the decision, and one good tax move could cover it several times over.

That’s why there’s no one-size-fits-all answer. The bigger the sum and the more moving parts, the more likely advice is to earn its keep.

You may not need to pay for advice if your lump sum is modest and your plans are simple. For example, if you want to:

• Clear debts. Start with the most expensive. Our guide to paying down debt walks you through it.
• Build an emergency fund. Here’s how to build one, and you can find the best savings rates in our regularly updated tables.
• Fill your ISA. Our simple guide to Stocks and Shares ISAs explains the basics, and the ISA fee calculator shows which platform would be cheapest for you.
• Weigh up mortgage, pension or investing. Our mortgage overpayment vs investing vs pension calculator compares the options side by side for your numbers.

If you want to invest but don’t want to pick funds yourself, a ready-made portfolio or robo-adviser can be a low-cost halfway house.

Our ready-made portfolio performance tables show how the main options have actually performed.

The real value of advice often isn’t picking the “best” fund. It’s tax planning and avoiding costly mistakes. Advice tends to be worth it when:
The sum is large. Once you’re into tens of thousands of pounds or more, small decisions add up to big money.

• You’re near a tax trap. If your income is close to £100,000, a well-timed pension contribution could save you thousands. Try our £100k tax trap calculator to see where you stand.
• You want to pay a lot into a pension. The pension carry-forward rule can let you pay in far more than the usual yearly limit, but the rules are fiddly and mistakes can trigger a tax charge.
• Inheritance tax is on your mind. Use our inheritance tax calculator to get a rough idea of what your family could face.
• The money came from a life event. Redundancy, divorce, inheritance or retirement often bring tax deadlines and emotional pressure at the same time.
• You’re investing more than you’re comfortable managing. If the thought of a market crash with your whole lump sum invested makes you queasy, see our guide to the signs you’ve outgrown DIY investing.

Little-known nugget: research by the International Longevity Centre, an independent think tank, found that people who took financial advice ended up around £40,000 better off on average than similar people who didn’t.

The biggest gains came from simple habits, like investing rather than leaving money in cash, and they applied to people who were just getting by as well as the well-off.

And for a reminder of what many people miss, read the tax planning most DIY investors miss.

If you do decide to pay for advice, a few simple steps make sure it’s money well spent:

• Ask for a fixed fee in writing before any work starts.
• Ask whether one-off advice is an option, so you’re not locked into a yearly charge you don’t need.
• Check they’re regulated on the Financial Conduct Authority’s register.
• Check they’re independent. Independent advisers can recommend products from across the whole market, rather than a limited range.
• Ask the right questions. Here are the questions that tell you whether your adviser is any good.

Tick any that apply to you.

• My lump sum is more than about £50,000
• My income is near £100,000, or near £60,000 with children
• I want to put a large amount into a pension
• The money came from an inheritance, redundancy, divorce or retirement
• I’m worried about inheritance tax
• I’d lose sleep if the investments fell in value

None or one? You can probably handle this yourself with the tools above.

Two or three? A free guidance session or a one-off second opinion could be worth it.

Four or more? Paid advice is likely to be worth exploring.

If your answers point towards advice, book a free, no-obligation chat with one of our advisers.

You’ll find out what they’d recommend and exactly what it would cost before you commit to anything, and they’ll tell you honestly if your situation doesn’t need them.

This guide is for education only and isn’t financial advice.

Everyone’s situation is different, so speak to a regulated financial adviser before making decisions. Tax rules can change and depend on your circumstances. The value of investments can go down as well as up.

Sources
How much does financial advice cost?, Which?
Those who receive financial advice are on average £40,000 better off, International Longevity Centre