The Cost-Benefits of Engaging an IFA – Fees Explained

For those accessing financial advisory services for the first time, the experience can be both confusing and expensive.

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 an Independent Financial Advisor (IFA).

In this article, the Fintuity team will introduce the common terms and potential fee outlays traditionally associated with accessing an IFA. The key consideration however is not the cost but the level of service that you will be provided, as well as the competency and reputation of the IFA involved

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

Whether you are looking for a full financial healthcheck 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 need professional assistance with, there are a range of fee models and structures that you may come across depending on the level of expertise and time commitments involved. Some common types of financial advisory fees include:

  • 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.
  • 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.
  • 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 ask for an ongoing fee to manage your portfolio – 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.

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

Your IFA fees are based on 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.

On average accessing an IFA in the UK will cost you between £500 and £5000 depending on the level of expertise that you require, with. It is important to note as well that IFA’s are paid for their services and charged not on commission.

In general terms however advisers will charge between 1-2% of the total assets of the financial asset – in many cases a lower percentage will be charged for a higher value asset and a higher percentage for lower assets.

Every adviser is different, but all should be happy to discuss their fees up front. Here are some average fees for typical adviser services. Whilst the costs may seem high, the need for expert advice is paramount – especially when nearing retirement. In many ways accessing the right information and advice will make your assets work harder for you in retirement and actually save you money.

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.

We do not charge any fees for our financial services as we receive commissions from product providers directly. 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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