Do you need a financial adviser or a wealth manager?
Savvy saver: Everyone, no matter what their assets are, should seek finance guidance
The looming Autumn Budget with its warning of punishing taxes has left many families wondering where to get financial help.
Yet few of us seek any professional advice – just 8 per cent – according to the Financial Conduct Authority (FCA), perhaps because the world of financial advisers and wealth management is considered as the preserve of the ultra-wealthy.
But everyone, no matter what their assets are, should seek expert finance guidance, says Tim Grimsditch, from advice comparison website Unbiased.
Here we explain the difference between financial advisers, financial planners and wealth managers – and how much each will cost you.
Financial planner
A financial planner will form a financial plan for a client. They will look at the ins and outs of your income and expenditure to create a roadmap of your savings over the next five to ten years and tell you how to maintain financial growth, says Brian Byrnes, of Moneybox. They will take into account your life goals, tax position and family needs.
He explains: 'They will tell you how much you could save and where you could put that excess income. They come into their own in retirement so they will help you with drawing down your pension and making sure that you don't run out of money.'
Financial planners do not tend to give investment advice or manage your money on an ongoing basis.
You don't need to have amassed vast amounts of wealth to speak to them.
Financial adviser
A financial adviser will assist a client with a specific financial challenge or when advice is required over a longer period of time. They will typically manage your money and recommend investments you should make, while looking at your tax and legal position.
They can advise you across a broader range of your finances – beyond investments – than financial planners or wealth managers do, for example, on insurance products, equity release or mortgages.
Importantly, they can help you to avoid costly mistakes, such as buying an inappropriate financial product or falling for an investment scam.
Holly Mackay, chief executive of investment website Boring Money, says many advisers have a minimum threshold which your total assets must exceed in order for them to work with you.
She says: 'If you're considering traditional financial advice, you should really have at least £75,000 to £100,000 in investments or pensions – that's the average minimum a financial adviser will work with.'
According to the regulator, the average person getting advice has more than £150,000 of assets under advice.
Wealth manager
A wealth manager will manage existing money you have invested and is typically a bit more hands-on with investments than a financial adviser. They will focus on investments but will take into account your goals and upcoming needs from a legal and tax perspective.
Byrnes says clients typically need a minimum of £250,000 saved for retirement or in investments to be taken on by a wealth manager. However, some high-profile companies ask clients to have at least £3million.
How to find financial advice and planning
There are currently more than 40,000 financial and mortgage advisers working across the UK.
You can check on websites such as Unbiased and VouchedFor which allow you to see the most appropriate for you, depending on how much money you have and what you are looking for. This is Money's financial planning partner Flying Colours can also help you find a financial planner or adviser.
Alex Whitson, from VouchedFor, says the key is to pick someone you can build a trusted relationship with and who has the right expertise to help you to achieve your financial goals.
He explains: 'If you want someone to evaluate your finances holistically and advise you on investment and pension products, a financial adviser or financial planner could be an option.'
Next, check whether a company is regulated. You can either contact the website which put you in touch with the adviser or the FCA website. For example, VouchedFor can tell you if they are regulated and, where possible, check that advisers have the appropriate qualifications.
Your first session is usually free
Your first financial consultation will typically be free. This introductory meeting will give you the opportunity to decide whether you feel confident taking advice from this person.
During the meeting, you can ask general questions about your finances, explain you and your family's financial situation and identify what steps, if any, you should take.
According to VouchedFor, the meeting ordinarily takes about 30 minutes and to get the most from your financial consultation, you should prepare a summary of your current financial situation (savings, debt, income, outgoings) and future plans.
If the financial adviser identifies any areas that require more detailed attention, they will be able to provide you with a clear price and proposal. There will be no obligation to continue with that proposal.
Before going into a first meeting, consider your goals, your current financial situation and how much risk you are willing and able to take with your investments.
Grimsditch recommends setting up a handful of initial meetings with different advisers before making your decision.
Independent financial advisers are not required to display their charges on their websites so you may have to have one of these initial meetings before they can give you an accurate quote.
This is because they will need to evaluate your financial situation.
How much will financial help cost you?
It can be tricky to work out exactly how much financial advice will cost you – especially as rates vary dramatically from one adviser to the next.
Fees will be based on several factors, such as how much time it will take to manage your assets and curate the advice and the size of the assets involved.
Some advisers charge a flat fee, others by the hour, and some charge a percentage of assets under management.
Make sure the company is completely transparent and that you understand the costs before committing to anything, warns Whitson.
According to Unbiased, advisers often charge between 1- 2 per cent of the asset in question, such as a pension pot, with lower percentages charged for larger assets.
This means higher fees may apply for smaller assets. Every adviser is different, but they should be happy to discuss their fees upfront.
With hourly rates, you can expect to pay anywhere between £75 and £350 per hour, says MoneyHelper.
The average hourly rate is about £196, according to VouchedFor.
Your costs will depend largely on the size of your assets and how complex your situation is. For example, creating a financial plan involving £100,000 of investments and receiving ongoing advice about it for five years will cost you £7,597 on average – £2,795 upfront and £4,802 in ongoing fees, VouchedFor says.
Similarly, consolidating three pension pots totalling £500,000 and receiving ongoing advice about it will cost £27,868 over five years –£8,881 upfront and £18,987 in ongoing fees.
Although this may appear to be a large cost, the investment returns and tax savings generated by the advice could outweigh the outlay.
For example, the Value of Advice report by Unbiased found that those who took advice on pension saving near the start of their careers saved an average £34,300 more than those who didn't take advice.
