What does it cost to get professional financial advice in respect of your pension pot or investments?

According to some new research, the average cost of pension financial advice is close to £3,000.  The research, carried out by consumer group Which?, looked at the fees charged by more than 100 financial advisers.  Its findings tell us about the typical cost of pension financial advice but also about the range of charging structures used by different financial advisers.

In order to carry out the research, Which? presented five different advice scenarios to 102 different independent financial advisers.

According to their research, it costs an average of £2,897 to get advice on the consolidation of a number of pension pots worth a total of £150,000 into a single pension plan.  This average covers a wide range of different charging levels for the same activity, with the highest fee quoted at £6,000.

For retirement advice on a pension pot worth £100,000, the average cost of advice was £1,837. Which? found the lowest price quoted for this type of advice was £300 and the highest was £4,000.

In respect of taking tax-free cash from a pension pot worth £150,000 and then entering into a drawdown plan, the average price quoted was £2,383.

The average advice charged quoted for investing an inheritance worth £60,000 was £1,472, and the advisers surveyed quoted an average of £524 for an annual review of a portfolio of investment funds valued at £60,000.

Which? also found that only one in five of the advisers they looked at published full details of their advice charges on their websites, in respect of the five different advice scenarios they considered. This meant the researchers had to call the advisers to determine the level of fees that would be charged.  They found that a further 34% of advisers had published a rough indication of costs on their websites, or alternatively had published their key facts document which details of some fees and charges.  However, nearly half of adviser websites contained no information about advice fees.

Calling the advisers who were included in the survey resulted in a better experience, with 87% of those called prepared to offer a rough idea of the charges involved for a scenario during an initial telephone conversation.  Most of the advisers called offered this price information without being specifically asked.

In terms of advice charging structures, which differ between advisers, the survey found that most advisers are charging an upfront fee which is calculated as a percentage of the amount to be invested. In fact, 79% of the independent financial advisers charged a fee on this basis.  The average upfront fee being charged was 2.9% of the amount invested which incidentally compares to Wells Gibson’s typical initial charge of 1%.

Which? found that a similar proportion of advisers were using this same method of charging for ongoing advice and annual reviews, with 87% charging based on a percentage of assets under advice.  The average rate being charged for ongoing advice and annual reviews was 1.3% and this compares to Wells Gibson’s typical ongoing charge of 1% for comprehensive Wealth Planning.

When considering financial advice costs, it’s important to keep in mind the value it can bring especially if your financial adviser or planner stops you making the wrong decisions, at the wrong time and for the wrong reasons!  There are some free alternatives, including the government-backed Pension Wise service but these can only offer information or guidance, rather that financial planning and advice which is tailored to your personal and financial position and lifestyle, financial and investment goals.

Pensions can be complex, with a wide range of choices and options to consider.  When you have worked hard and saved money for your entire working life, making the best possible decisions about your pension pots is essential.