The third annual Cost of Advice guide reveals the average fees charged by financial advisers for common advice scenarios, and confirms that fees are holding steady.
The figures, based on a survey of advisers listed on the Unbiased.co.uk database, show the median hourly rate charged by advisers is £150, unchanged from 2014, a drop of 14 per cent compared to 2013.
According to Unbiased’s analysis the average cost of an initial financial review and report has stuck at £500 for the last three years but the cost of advice on a £200 a month pension contribution has risen from £500 in 2013 and 2014 to £580 this year.
The cost of advice on converting a £100,000 pension fund into a lump sum and annuity has also increased from £1,350 in 2013, to £1,500 in 2014 and £1,750 this year.
However the cost of advice on a £200,000 pension pot has fallen, according to Unbiased, from £3,000 last year to £2,500 today.
Advice scenario | Median fee charged 2013 | Median fee charged 2014 | Median fee charged 2015 |
Hourly fee | £175 | £150 | £150 |
Initial financial review and report | £500 | £500 | £500 |
Advice on a £200/ month pension contribution | £500 | £500 | £580 |
Advice for investment strategy for a £50,000 inheritance for a 50-year old seeking medium term growth | £1,500 | £1,500 | £1,500 |
Advice on converting a £100,000 pension fund into a lump sum and annuity | £1,350 | £1,500 | £1,750
|
Advice on a £200,000 pension pot (client requires full advice | N/A | £3,000 | £2,500 |
Advice on setting up a drawdown scheme on a £300,000 pension fund | £3,000 | £3,000 | £3,500 |
The latest research from Unbiased also reveals the cost-benefit ratio for those who take financial advice.
The 2015 Value of Advice report by Unbiased and MetLife revealed people who had taken financial advice saved on average £71 more per month than non-advised savers.
Setting these findings alongside the Cost of Advice research makes it possible to see how the benefits compare to the costs.
Benefits from advice on retirement planning:
The numbers | Start at age 35 | Start at age 25 |
Cost of advice on a £200/month pension contribution | £580 | £580 |
Boost to retirement savings | extra £25,730 in pension pot (excl. tax relief and interest) | extra £34,300 in pension pot (excl. tax relief and interest) |
Return on the initial cost of advice | 4,336% | 5,813% |
Karen Barrett, chief executive of unbiased.co.uk, said: ‘These findings show quite dramatically how the cost of retirement planning advice can be dwarfed by the long-term benefits.
“The Value of Advice report found that, on average, people who take advice on their retirement planning have an estimated £48,279 more in their pot compared to those in a similar income bracket who do not take advice, with tax relief and interest factored in. It’s hard to think of a more clear-cut demonstration of value for money.
‘It is also important not to underestimate the additional benefits of advice, such as time savings, confidence and peace of mind.
“Our research has shown time and again that seeking professional advice sooner rather than later is the most game-changing factor when it comes to planning for retirement.’
Unbiased’s findings came after last month a survey showed on average those planning to make a withdrawal from their pension pots would be willing to pay just £253 for advice.
Website Money.co.uk commissioned One Poll to survey 669 over-55 year olds with a pension and found that just one fifth would be willing to pay for it, dropping to just 13 per cent of men.
Almost 60 per cent said that they do not feel they need it, while almost 30 per cent believe advice is a waste of money, with a similar amount saying they cannot afford it, with 15 per cent claim they just want to access their money quickly and do not want the “hassle” of taking advice.
emma.hughes@ft.com
