How much does financial advice cost? 14% less than it did last year...
With much being made of the new pensions regime in the news of late, together with tales of stock market depression and pitiful savings rates, you could be forgiven for wondering if you might need a financial adviser. Headlines from a new report by unbiased.co.uk suggests that now could be a good time to get financial advice, given that prices have fallen around 14%. However, as with most things, and particularly things related to financial advice, you have to remember that prices can go down as well as up.
The thing is, that a new charging structure was imposed on financial advisers during 2012. Instead of being able to offer ‘free’ advice, but rake it in over a number of years in trail commission, advisers became compelled to be up-front about fees and charges and had to levy a fee to make it clear to consumers exactly what they were paying. Previously, an adviser might have received an annual commission over a number of years, commission paid out of annual charges levied on an investment (for example) meaning that, over time, you would have paid far more for the service than if you had paid an up-front bill.
However, up front charges can put people off, even if there may be some scope for offsetting and initial commission earned, and in 2013, just after the new rules were introduced, it seemed financial advisers were exacerbating the problem, as median hourly rates for advice went up from just over £150 per hour in 2012 to £175 an hour in 2013. The latest figures show that the hourly rate has now fallen back to what it was before the change in the rules at a median £150 per hour.
But what the unbiased.co.uk survey also showed is that standard fees for various financial scenarios have not actually changed much, as shown in the table below.
This information is, of course, useful for people who might want to get some advice, but don’t know how much it will cost. The Money Advice Service (MA) has also produced a helpful guide for when it might be more worthwhile not to pay for advice, but rather do the research yourself- in general terms, the greater the risk to your cash, the greater the likelihood that financial advice might pay off in the long run. MA also highlight that you can still get advice covered by commission from tied agents, but these are only going to offer you products from their employer, and this might not actually be the best product for your particular circumstances.
MA is also currently compiling a list of financial advisers, using FCA data, and intends to list the fees charged by various advisers as part of the directory. MA wants to make the process of getting financial advice simpler and more transparent for consumers, although the industry is apparently concerned that publishing these details might lead to a ‘price war’ with advisers competing on cost. Which is supposed to be a bad thing?