How much does financial advice cost?

The cost of financial advice isn’t quite as simple as quoting a pounds and pence figure. We asked our financial planner Casey to explain…

How much does financial advice cost?

This is typically one of the first questions a prospective new client asks once they have outlined what problems they are trying to solve.

However, the question doesn’t currently have a straightforward answer for the simple reason that ‘financial advice’ relates directly to a transaction; investing money, taking out insurance, transferring funds, switching products etc. Therefore, the cost of this advice is typically a fixed monetary amount, or a percentage of the funds being invested or transferred.

In my opinion, great financial advice (financial planning) needs to feature far more than a product transaction, especially when you are attempting to plan for your future or deal with a life-changing event.

Why financial advice is like a doctor’s diagnosis

The first steps should always involve taking enough time to understand you as an individual and then creating and reviewing a robust financial plan. All this should be done before any financial advice is given.

It’s the same reason you wouldn’t expect a doctor to diagnose any treatment or prescribe any solution before you fully explained your symptoms and they ran all the relevant tests!

In our experience, financial advice needs a solid foundation to be truly effective. This foundation is a plan that includes a financial forecast based on prudent assumptions considering various ‘what-if’ scenarios specific to your circumstances and what it is you are trying to achieve.  Without this any financial advice will be just rudderless.

Again, would you set off on a big family trip without a destination in mind, a map (or sat-nav), accommodation, a list of possible things to do, the right clothing, or the family dog? So, why would anyone invest their life savings or start thinking about retirement without creating a clear plan first?

Without a clear plan I really don’t understand how anyone can anyone provide ad-hoc financial advice, unless this just relates to long-standing best practice: ‘spend less than you earn’, ‘review and monitor your expenditure’, ‘create an emergency fund’, ‘automate savings’, ‘increase your savings each year’, ‘invest and forget’ and ‘minimise costs’.

Or, advice could be given where there is just an obvious transactional need such as purchasing an annuity; establishing a mortgage; purchasing life insurance, critical illness or income protection; starting a pension; or arranging a will and Lasting Powers of Attorney.

So, this leads us to a point where ‘financial planning’ and not ‘financial advice’ should be the starting point for anyone wanting to take the success of their financial future seriously.

This means that the actual question should be: How much does financial planning cost?

Or even: How much am I willing to invest in my financial future?

In our opinion, the cost of financial planning should be a monetary fee that will vary depending on the complexity of your situation and the work involved. This fee should also include the cost of any financial advice (typically called ‘implementation’).

Most importantly, it should be a monetary fixed fee that also reflects the value of the service provided. That’s why we disclose our fees on our website and have asked some of our clients to share their experience of the service we provide.