Taking financial advice on your pensions and investments could leave you nearly £50,000 better off in the space of a decade.
That's according to a new report by Royal London, which claims that 'non-affluent' investors can enjoy a significant uplift in wealth by using a financial adviser.
Here, we take a look at the pros and cons of financial advice, including how to find the best adviser and how much you might need to pay.
Royal London says that while financial advice is often touted as the preserve of the super rich, it can actually offer greater benefit to those 'just getting by'.
Its 'Revisiting the value of financial advice' report found that a 'non affluent' group of investors enjoyed a 24% pension boost and 35% increase in financial wealth, compared with 11% and 24% in the affluent group.
This growth, it claims, can partly be explained by advised customers being more likely to invest in riskier assets that offer greater returns.
When you choose an adviser, you'll usually start with an introductory meeting where you'll explain your ultimate aims. After this, the adviser will conduct a 'fact find' and look closely at your finances, before providing a full financial plan including any product recommendations.
Financial advice comes from two different sources, independent financial advisers (IFAs) and restricted advisers.
IFAs are obliged to look at the whole market and consider fund charges when making recommendations.
Restricted advisers, meanwhile, don't have to assess the whole market and are allowed to receive pay linked to the amount you invest in their recommended funds, which can be a riskier proposition.
It's worth being aware that the term 'restricted adviser' is also sometimes used to describe an adviser that works on one specialist area (such as equity release).
Financial advisers generally charge in three ways: flat fees, hourly fees or as a proportion of the money you're investing.
When Which? surveyed 108 financial advisers in August, we used the following three scenarios to get average quotes:
|I'm approaching retirement with £100,000 in savings, £150,000 pension and £100,000 in an investment Isa, and I want advice on drawing an income in retirement.||£2,540|
|I'm 50 with comfortable savings and no mortgages, and would like to invest a £100,000 inheritance.||£1,980|
|I'm 10 years into my career with £60,000 in savings and £40,000 in an investment Isa. I'd like to start saving for my child's university education.||£1,060|
Bear in mind that the costs of financial advice add up. Simply investing a £50,000 portfolio for five years would cost £3,300, compared with £4,175 with financial planning, according to quotes from VouchedFor in May this year.
A new generation of 'robo-advisers' such as Nutmeg and OpenMoney offer cheaper variants of financial advice, using both mobile apps and advisers over the phone.
We arranged 12 undercover meetings and found that some of SJP's advisers broke FCA rules by failing to detail their upfront fees and ongoing charges.
We also found that several advisers failed to inform customers that they were 'restricted' advisers rather than whole-of-market independent financial advisers.
With this in mind, it's vital to do your research and ensure you're definitely getting the service you're paying for before handing over any cash.