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How much does it cost to see an independent financial adviser – and what would you be happy to pay?

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Figures show that independent financial advisers charge £150 an hour for their time, on average. The average fee for someone who wants advice on what to invest a £50,000 lump sum on was £1,500, while someone who wanted an initial financial report or review could expect to pay £500. However, research from NFU Mutual shows that most people were only prepared to pay £25 an hour.

What independent financial advice costs
According to the research from Unbiased, which represents independent financial advisers, advisers charge an average hourly rate of £150 – although this varies according to where they are based, their level of expertise and other factors, such as how much their professional indemnity insurance costs.

* An initial financial review would cost £500

* Advice on a £200 a month pension contribution would cost £500

* Advice on what to do with a £50,000 inheritance would cost £1,500

* Advice on turning a £100,000 pension lump sum into a lump sum and an annuity would cost £1,500

* Advice on setting up an income drawdown scheme for a £300,000 pension fund would cost £3,000

How much would you pay for advice?
In April 2014, NFU Mutual asked people if they’d taken financial advice and how much they’d pay for it. It found:

* Almost three quarters of women (73%) and two thirds of men (65%) took advice when they invested some money, bought a house, put money in trust or took out an annuity.

* Of those who took advice, 60% of women and 51% of men took professional advice from a financial adviser.

* Others took advice from a family member or friend (13% of women and 15% of men).

It also asked people if they knew what ‘RDR’ is.

SAVVY TIP: In simple terms, RDR changed the rules for financial advisers giving advice about pensions or investments. It meant that they could no longer take a commission for recommending a product but had to charge for the advice instead.

The researchers also asked how much people would be prepared to pay for financial advice.

* The average amount that people were prepared to pay was around £25 an hour, when the fees charged by most financial advisers are between £75 and £250 an hour.

People who didn’t get financial advice from a professional but used a friend or family member instead were asked why this was, and there were several answers where there was a significant difference between men and women.

* Almost half (49%) of women compared to 39% of men said that they trusted their friend more than a professional adviser.

* 18% of women compared to 25% of men said that the level of fees was unclear.

* 23% of women compared to 28% of men said that professional advice wasn’t worth the money.

* One in four (25%) of women compared to 14% of men said that seeking professional advice was daunting and confusing.

* Interestingly 13% of women and 24% of men thought that the financial adviser could be biased because he or she was being paid by the customer. I says ‘interestingly’ because one of the reasons why the financial regulator decided to change the rules so advisers couldn’t be paid a commission was because people thought commission encouraged advisers to sell them products for a financial reward.

* Only 3% of women and 9% of men said they knew the difference between ‘whole of market’, ‘independent’ and ‘restricted’ advisers.

SAVVY TIP: An independent adviser means someone who can advise on any investment product across the whole market. They are the only advisers who can call themselves ‘independent’. A restricted adviser can only advise about their own company’s products or about certain products across the whole of the market. So, it could be someone who advises about pensions only, but can look at those provided by the whole market, or someone who advises on insurance company A’s products whatever they are.

Related articles:

Financial advisers can no longer be paid commission for investment advice

How to find an independent financial adviser you can trust

Female financial advisers – are you better off taking advice from a woman?

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