How Much Should You Pay For A Financial Advisor?
To establish how much a Financial Advisor might charge, there are a number of elements to consider, both personally (for the client) and professionally (for the firm that has been hired).
To provide a clear understanding of what they offer, most Financial Advisors first arrange a meeting with the client to discuss their terms and fees, free of charge. This will give a sense of how they work and how much they might charge, though fees tend to vary based on what the client is charging them for.
Financial Advisors can offer or negotiate various ways of payment, for example:
• Hourly rate – In the UK, the average hourly rate is £150 per hour, but this can fluctuate from £75 to £350 per hour.
• Monthly fee – Depending on the client’s investment, the monthly fee would be either a flat fee or a percentage.
• Set fee – This would cover an entire piece of work or project, so could cost from hundreds to thousands of UK pounds.
• Ongoing fee – If the Financial Advisor provides an ongoing service, they can charge an ongoing fee, but not if the client is still paying off an initial fee.
Before they start providing services, Financial Advisors must provide a copy of their charging structure to the client. This will provide an estimate of how much their service will cost, or a confirmation of the cost as a whole.
The fees can vary due to a number of factors, such as:
• Where the firm is based – Their office costs could be higher due to the expensive location in which they are situated.
• Delivery of service – Financial Advisors can offer services via the phone or email which lowers their overheads. It’s important for the client to be made fully aware and to receive a recommendation of this service to ensure they are protected.
• Who provides the service – The costs will fluctuate whether the service is carried out by a highly-qualified advisor rather than a supporting colleague who would need approved sign-off. This often depends on the level and type of advice the client requires.
• The complexity of the client’s situation – If the client’s own papers are not in good order, the Financial Advisor will charge extra time for arranging them. They should only be hired to provide expert advice and complete tasks that the client is not capable of doing.
If the client requires advice regarding pensions, investments or retirement income products, Financial Advisors must charge an advice fee rather than making a commission.
However, they can be paid commission on:
• Travel, home or general insurance
• Protection insurance
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