A good independent financial adviser (IFA) can take the stress out of life's financial decisions and set you up for the future.
But if you're not sure if you can afford an IFA, a lack of transparency makes it difficult to find out.
When Which? looked at the websites of 100 IFAs in April 2021, we found 89 showed no pricing online.
Of those that did display pricing, some presented their hourly rate per consultation, while others showed the implementation fee and ongoing percentage fee for hypothetical scenarios. Some were upfront about associated product-related charges; others excluded these.
Here we reveal the truth about IFAs - the costs, the value they offer and how to get the best advice for your money.
Fees matter because many people have found themselves priced out of financial advice.
According to the Financial Conduct Authority (FCA), the average advised customer has more than £150,000 of assets under advice. Research commissioned by Canada Life in 2019 showed that, in a survey of 250 advisers, only 16% would take on a client with less than £100,000, down from 50% in 2014.
Some in the advice industry attribute this 'advice gap' to the move away from commission after the Retail Distribution Review in 2012. An FCA retrospective of the review last December blamed the industry: 'Advice firms appear to face little competitive pressure to innovate and offer new, more affordable services, or to try to attract less wealthy consumers.'
The wealth industry association, PIMFA, has called on the government, the FCA and the wider sector to work together to make advice more affordable for all.
You don't always need to have six figures in the bank to use an IFA, or to benefit from their advice. But you do need to be able to understand how much an IFA will cost.
The FCA says advisers charge an average of 2.4% of the amount invested for initial advice and 0.8% a year for ongoing advice (1.9% p.a with underlying product and portfolio charges factored in).
It can be difficult to imagine how much this will cost you in practice. In March 2021, VouchedFor analysed the costs of 1,020 advisers on their platform to provide an average of how much it would cost to get ongoing advice for five years in three different scenarios:
But these are average costs. The fact is fees can vary wildly.
When we asked 11 financial advisers how much they charge, the lowest fee we were quoted for the consolidation of three pension pots worth a total of £250,000 was £8,750, whereas the most expensive fee was more than double that at £21,500.
IFAs aren't required to display costs on their websites, and most won't give an indication of costs until they've met you, to ensure their quote is accurate based on your financial situation.
But this can encourage people to go with the first IFA they meet. Only 12% of people who've taken advice told us they got more than one quote before choosing an adviser. We generally advise getting three.
While most of these said they were confident in their ability to manage their own finances (52%), or didn't think an IFA suited their needs (26%), 15% didn't trust IFAs and 15% found them too expensive.
Below are the three most common topics people get advice on, according to the IFA users in our survey:
We asked Robin Keyte, director of Keyte Chartered Financial Planners, how he would approach a typical scenario: inheriting a lump sum of money.
'First, we'll ask you to consider your existing debts,' said Robin. 'Then, if we decide an investment is appropriate, we'll think about how best to utilise that investment by taking advantage of tax efficiencies, Isa allowances and pension contribution allowances, before choosing the investment funds that are best matched to you.'
Unlike their restricted counterparts - who can only recommend certain products or providers - independent advisers can recommend products across the whole market. St James's Place and Schroders Personal Wealth are examples of advice firms that use a restricted model.
A comparison site is the best place to start. Unbiased and VouchedFor are the biggest. Use their filters to narrow down a shortlist based on areas of expertise and customer reviews, then set up meetings with at least three.
If you don't need to meet your adviser in person, looking beyond your local area could save you money. For instance, VouchedFor data reveals average financial planning costs in South East England to be higher than in the North.
'Be prepared - have any recent financial statements to hand and have a think about your income and expenditure, both now and in retirement', said Olivia Bowen, a chartered financial planner with Castlefield. 'And when you meet - do you like them? Trust is important, as it's likely to be an important and long-term relationship.'
You should also look at their qualifications. All advisers must meet QCF Level 4, but further qualifications include the chartered planner qualification and the certified planner qualification.
Robin Keyte believes the latter is especially valuable for clients. 'This means the IFA should be able to do a decent cashflow forecast - that's good at spotting any future banana skins', he said.
'Ask if they're a member of the UK Sustainable Investment and Finance Association', said Olivia, who herself specialises in ethical investing. 'They should also ask you to complete an ethical questionnaire - if not, then it's unlikely they are specialists in this area.'
'The fees are about 1.5%, as I recall, which does take a sizeable amount of our investment,' she said, 'but the firm is completely open about the fees and updates us quarterly, and we think it's worth it because they've managed to keep our investment ahead of our expectations during Brexit and Covid.'
The three IFAs they spoke to all offered similar services at around the same price. In the end, they went with their current IFA because they sensed they'd have a better long-term relationship.
'He's open, doesn't use jargon, is happy to go over anything we want until we understand it, has a sense of humour when it's appropriate, always 'knows who we are' and is fairly local when we're in a position to visit the offices,' Steph told us. 'Also, the portfolio is just what we want, and he seems to understand our needs and aspirations.'
Some of the Which? members we spoke to fell into the advice gap. One said they had a single meeting with an adviser and didn't hear from them again: 'Once it was clear my investment pot was modest, he lost interest.'
If you're in the same boat, there are still some ways you can get advice. You can use VouchedFor or Unbiased to filter advisers according to your investment pot size. If you can't afford the remaining options, you could pay an IFA a fixed fee to get one-off advice, rather than pay for an ongoing service, or use the alternatives we list below:
Magazine subscribers also get access to tailored 1:1 guidance from the Which? Money Helpline.