Financial advice isn’t free - ever. Even if you don’t physically hand over any money, the adviser will get paid.

If you get advice from a financial adviser (whether they are independent or not), you have to pay for it. The difference with independent financial advisers is that they have to give you the choice of paying by fee or commission (the commission is taken out of the premiums from the products you buy). If you go to someone who’s employed by an insurance company or bank to sell their products, or someone who’s tied to a limited number of companies, they will invariably take a commission.

How you may be charged for advice
Financial advisers will normally tell you how they'll charge you for advice when you make contact - either at your first appointment or when they first write to/email you. If you’re seeing an independent financial adviser, it’s down to you how you pay.

The choices are:

• An hourly fee: Your adviser charges you according to the length of time he or she spends on your finances.

Pros: The advice will be impartial and adviser doesn’t have to sell you anything to pay their bills. Normally fees are lower than commission levels, but if your finances are complicated or you’re only investing a small amount of money, the opposite may be true.

Cons: You won’t know how much the final bill will be (although the adviser should give you an indication upfront).

Expect to pay: Anything from £95-£300 an hour. The price will depend on the expertise of the IFA, where the office is based (higher business costs will always be reflected in the price) and the pricing policy of the firm itself.

SAVVY TIP: Check that all the commission will be refunded into any products you take out (so more of your money is invested) and ask the adviser how much value they will add compared to the amount they charge.

• A fixed fee: You agree a fee for the adviser’s work in advance.

Pros: You know exactly how much you’ll pay.

Cons: It can be difficult for an independent financial adviser to know in advance how much time they will spend on a particular task, so they may charge more to cover themselves.

Expect to pay: It will vary depending on complexity and amount of work involved.

SAVVY TIP: Check what the independent financial adviser’s policy is if the work takes less time than anticipated and ask for a copy of the timesheet with your invoice.

• Commission: The independent financial adviser is paid a commission by the company whose product(s) they recommend and sell you.

Pros: You don’t have to hand over any money to the adviser directly and you avoid paying VAT.

Cons: The advice may be biased in favour of the products that pay the biggest commission. Commission is taking out of your premiums so less of your money is invested, which means you miss out on the return that money could have generated. Think carefully before you agree to an independent financial adviser receiving commission in return for advice.

Expect to pay: Commission rates vary between products and different providers. An IFA can be paid up to 5% for recommending certain investment products.

SAVVY TIP: Check that the independent financial adviser will negotiate on commission rates. They should receive no more than 1-3%. If you’re buying a long-term investment product, such as a pension, ask the adviser to work out how much you might get once commission has been taken out and without commission deducted. The results might surprise you!

• Commission offset: The independent financial adviser is paid a commission by the financial company (as above), but the commission is offset against the cost of fees. If the commission is more than the fees, the difference is refunded into your product.

Pros: You don’t pay the adviser upfront, but advice is charged by the hour and you don’t pay VAT.

Cons: The way fees are charged may not be very transparent. Some advisers charge fees that - uncannily – are the same as the commission payments.

Expect to pay: Ask for an estimate before you go ahead.

SAVVY TIP: Ask the independent financial adviser if he or she will give you a breakdown of how much they charge and exactly what work they have done.

Finding an adviser
• Independent financial adviser: You can find an independent financial adviser using the Unbiased website. It's funded by an organisation that's designed to promote independent financial advice.

• Certified Financial Planners only ever work on a fee basis, they have to have their licence renewed every year and have to abide by a code of ethics. You can find details of certified financial planners at the Institute of Financial Planning website.

• Check that a financial adviser is authorised at the Financial Services Authority’s register.

SAVVY HELP: Karen Ritchie, an independent financial adviser with FPW, is one of SavvyWoman’s panel of experts. You can ask Karen a question about financial advisers by clicking here.