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A Cost-Benefit Analysis of Accessing IFA Advice – Fees Explained

With the pandemic ongoing and economic outlook increasingly uncertain, many are continuing to turn to the Independent Financial Advisor (IFA) community for expertise and support to help weather the storm.

For those accessing financial advisory services for the first time however, the associated fees of accessing financial advice can initially appear high.

This article will assess in detail the costs that are typically associated engaging an IFA.

Do You Need the Help of an IFA?

Whether you are looking to consolidate your existing financial portfolio or to access new financial products, there are a number of practical and cost considerations to take into consideration when accessing the advice of an IFA.

Whatever your financial goals, assessing and acting on your longer-term financial aims such as pensions, inheritance and mortgage planning, will invariably require an expert eye to ensure that your hard-earned funds are working to their maximum potential. Whilst you can of course do much of this yourself, an IFA will be able to centralise your financial portfolio into one platform with the latest insights and advice.

While the costs of IFA advice are of course a major consideration, depending upon your circumstances a good IFA can not only help you grow your portfolio but also save money in the long run.

What Types of Fees will you Likely Encounter when Engaging an IFA?

Whether you are looking for a full financial health check to consolidate your finances, to re-evaluate your pension provision or to select a new financial product, there are a number of services that can be provided by the UK’s IFA community.

The reality however is that regardless of the services that you may require, there are a range of fee models and structures that you will come across when speaking with IFA providers.

There are however some common types of financial advisory fees to note:

  • Percentage of Assets
    If you have an adviser managing your investment portfolio over a period of time, they may charge a percentage of the portfolio’s total value per annum as opposed to a fixed fee. In this way the fee grows as the portfolio grows.
  • Fixed Fee
    The IFA will perform a specific service for a set price agreed in advance. We would suggest that you confirm what exactly the fee will involve in writing prior to any work starting.
  • Hourly Rate
    With an average of £170.00 per hour in the UK, this could be a useful structure for charging smaller and more bespoke services. It is important however that you get a full and time specific quotation from your adviser.
  • Ongoing Portfolio Management Fees

It is also worth noting that some advisers may well ask for an ongoing fee to manage your portfolio annually – ranging from 0.5-1%.

Whilst these are the most common fee structure, an adviser may request an alternative payment model.  The key consideration however is the level of service and technical expertise that you will be able to access deal from your IFA.

IFA Costs Vs. Portfolio Benefits –  How Much Does Accessing an IFA Cost?

In general, your IFA fees are based upon a number of factors including; the level and extent of the advice you need, how much time it will take, and the size of the assets involved.

IFA costs will depend entirely upon your requirements and portfolio complexity and there is no fixed price for advice support. However, on average accessing an IFA in the UK will cost you between £500 for preliminary works and portfolio management can extend north of £5000 for more extensive and complex works. An IFA should always give you an indication of the projected fees in advance.

It is important to note as well that IFA’s are paid for their services and do not charge you commissions directly.

In general terms however advisers will charge between 1-5% of the total assets of the financial asset, including product fees – in many cases a lower percentage will be charged for a higher value asset and a higher percentage for lower assets.

Here are some average fees for typical adviser services. Whilst the costs may seem high, the need for expert advice is often paramount – especially when nearing or planning for retirement.

Here are some average industry costs associated with a number of real-life case studies:

  • £200,000 Mortgage – the average cost is £425
  • Consolidating Three Pensions to a Total of £250,000– £13,510 with a £5,000 upfront charge, £8,510 ongoing charges over five years.
  • £20,000 Investment ISA – the average cost is £1,400 with a £600 upfront payment and an average of £800 ongoing management fees over the next five years
  • £100,000 Investment – £5,704 with £2,850 upfront and an £2,850 ongoing management over five years
  • Average hourly rates of £150 -£190 for bespoke works

Introducing Fintuity – the UK’s Most Cost-Effective Digital IFA

Fintuity is a digital IFA and as such we run a hybrid advisory model combining the experience of human advisors with the efficiency of modern technology.

Optimising every step of the advisory process, we can keep our operational costs significantly lower than those of a traditional financial advisor working out of a brick and mortar office. It allows Fintuity to operate with smaller-than-usual investment limits and substantially-lower management fees than traditional IFA firms.

Our fees are transparent and you pay for what you get. We charge between 1% and 1.5% from your investable assets for the Investment and Pension Advice services.  In comparison, traditional IFAs would normally take 2% – 3% of the customers’ investable assets.

Our Fees Explained: We do not charge any fees for our insurance services as we receive commissions from product providers directly and we do not receive commissions for investments. In short we only charge for the advice given. Please note that investment products will come with their own fees and platform costs which will be presented to you at an early stage. We aim to keep these as low as possible while still fulfilling the financial requirements of our clients.

We work with numerous product providers to choose from, so our advisors will present you with several detailed action plans that would work for you and then it is up to you to decide which road to take!

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