PAYING FOR FINANCIAL ADVICE
You may think that my first article in this series should have concentrated on how much you should pay but paying for something means getting value for money. So, before discussing cost I thought it was important that you understood what you should expect for your money.
It is difficult to tell you how much you will have to pay for advice because each firm will have a slightly different method of charging but there will be a similar pattern. The pattern will be something like this:
- You will be asked to pay for the initial report. At the first meeting the adviser should explain what is likely to be included in the report and how much it will cost. You will need to agree to this before the adviser will proceed and you may be expected to sign an agreement that you will pay for the report. It is therefore important that you establish as far as possible the likely content. It may be worthwhile to ask to see a copy of a report which has been done for someone else with a similar problem. The firm may have a flat fee or charge an hourly rate. If they charge an hourly rate you will need to ascertain how many hours it is likely to take to write the report
- The charge for the original report will also include the meeting to discus the findings in the report
- If you agree with the findings in the report, you will now progress to the implementation stage. The cost for implementation may be on an hourly scale or a percentage of the funds being invested. At this stage you may be given the option of paying by cheque or bank transfer or having the fee deducted from the amount invested. You need to remember that either way you are paying for the advice. It may be worthwhile enquiring at this stage which method of payment is most tax advantageous.
- The adviser will now make a charge for ongoing administration and reviews. This is likely to be a percentage of the funds they manage for you and could be anything between 0.25% – 1%. In some cases this can be a large amount of money. You need to keep this under review to make sure you are getting value for money. It would be unreasonable to challenge this on an annual basis because some years the adviser may do very little work for you and in other years a great deal. Most advisers will have a record of the time spent on your case and it is worth checking this say every three years.
Before taking advice, I suggest you visit a number of advisers. You are going to see not only how much they charge but what service they provide. Getting your future financial affairs into a good state is worth paying for so you should not judge the advisers on cost but rather on the potential value of advice.