A survey of Unbiased advisers shows the average cost of an initial financial review is £500 - almost double the £253 consumers aged 55 plus are willing to spend.
Website Money.co.uk commissioned One Poll to survey 669 over-55 year olds with a pension to find out how much they would be willing to pay for advice. On average, those planning to make a withdrawal from their pension pots said they would be willing to pay just £253 for advice.
However the Money.co.uk poll also found that just one fifth would be willing to pay for advice at all, dropping to just 13 per cent of men.
Even though you can question the validity of asking consumers how much they would be willing to pay for advice - I personally would like to pay £50 for a plumber, but they will charge a lot more than that - the findings make for disturbing reading.
After all these years, it makes me worry that consumers still do not truly understand the value of advice and what drives your costs.
Unbiased’s survey of 140 advisers in October 2014 found the typical price charged by advisers for advising on and setting up an £11,000 investment Isa was £358 and the typical cost of advice on an £80 a month pension contribution was £450.
When I asked the Association of Professional Financial Advisers for thoughts on the disparity between what consumers want and what they can expect to pay for advice, their director general Chris Hannant pointed to regulation.
Ultimately, all of this protecting the consumer has made advice too expensive for the bulk of consumers to access it.
Ultimately, all of this protecting the consumer has made advice too expensive for the bulk of consumers to access itYes, the Retail Distribution Review increased professionalism in the market, but this, coupled with ever escalating regulatory fees, has wrapped consumers in too much cotton wool and increased the cost of doing business to absurd levels.
If I could pay £50 for a plumber rather than a couple of hundred pounds, and have to sign something saying my lower cost limits me to no recourse or free secondary call out if the first bit of work went wrong, then I would consider it.
Is it time for consumers to have the freedom to reduce your costs by giving them a say about whether they accept the cost of regulation?
| Advice scenario | Typical cost* |
General | Initial financial review/review | £500 |
Investment | Advice and set up of £11,000 investment Isa | £358 |
Investment strategy for a £50,000 inheritance for a 50yr old seeking medium-term growth | £1,500 | |
Retirement planning | Advice on an £80 a month pension contribution | £450 |
Advice on a £200 a month pension contribution | £500 | |
At retirement | Converting a £30,000 pension fund into a lump sum and annuity | £675 |
Converting a £100,000 pension fund into a lump sum and annuity | £1,500 | |
At retirement advice on £100,000 pension pot (client requires full advice) | £2,000 | |
At retirement advice on £100,000 pension pot (client knows what they wish to do) | £1,000 | |
At retirement advice on £200,000 pension pot (client requires full advice) | £3,000 | |
At retirement advice on £200,000 pension pot (client knows what they wish to do) | £1,000 | |
Set up of a drawdown scheme on a £300,000 pension pot | £3,000 | |
At retirement advice where the client has a £200,000 Sipp, some DB income, £100,000 of investments and a £250,000 investment property, incorporating estate planning | £3,500 |
emma.hughes@ft.com
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