Want one-off financial advice? Here’s what to ask for and the costs involved

Many people could benefit from one-time help over some aspect of their finances, and this need not tie you into a long-term relationship with an adviser.

Advisers were banned from taking payments from financial providers for pushing their products a decade ago, so many have changed their practice to charging upfront fees for initial help plus levying an annual percentage of your funds for their services.

But paying ongoing fees is not compulsory, and unless you are getting a substantial level of ongoing help in exchange each year, might not be value for money.

Seeing a professional adviser: Many people could benefit from one-off expert help over some aspect of their finances

It’s perfectly acceptable to ask an adviser for expert assistance on a particular financial concern, agree between you it will be a single transaction, pay up, and walk away.

So, what should you ask for and expect to get, and on what kind of issues, if you approach an adviser for one-off help – and how much might it cost?

And when you invest a pension and intend to live off the income over many decades – where the question of one-time versus ongoing advice is much more finely balanced – what should you weigh up before deciding how much help you need?

When is it useful to get one-off financial advice?

Getting one-time help for a pre-agreed fee can be appropriate in the following situations.

Setting up a strategize to accomplish a certain level of income by the time you retire

In these circumstances, someone in their 30s or 40s now might be looking ahead to a retirement age of 68, and wanting to create a decent income over and above their state pension.

For a one-off fee, an adviser could create a cash flow report which tells them how much they need to save, and offer a practical strategize to accomplish this goal.

Arranging a strategize to help you retire early

If someone hopes to retire at 50, 55 or 60, an adviser can help them find out what level of income they need in retirement.

An adviser will tease out your objectives, and tell you whether your goal is achievable and what you need to do to make it happen, or if you are already on course how you can advance improve your situation.

Fallout from the abolition of the lifetime allowance

Chancellor Jeremy Hunt ditched the £1,073,100 total limit people can have in their pension pot without facing tax penalties with effect from April 6 this year.

But for people with large pension pots, the longer term implications – such as the impact on the tax-free lump sum – still need to be hammered out.

Meanwhile, there is a chance that if elected at the next election, Labour will reintroduce the lifetime allowance in some form.

> How to defend your pension from the taxman

Buying life assurance

This means setting up cover to last until you die, as opposed to life insurance which will only be in effect for a set period.

This could be suitable for someone who doesn’t have enough disposable income to save big sums, but wants enough cover to get their mortgage paid off and protect their family’s financial position if they die.

Wanting to know what to do with an inheritance

People coming into money, especially if their means were relatively modest beforehand, often need help deciding what to do with a large lump sum, and how to mitigate any future inheritance tax liability for their own heirs.

> 10 ways to avoid inheritance tax (legally)

Creating a strategize to financially assist your child in later life

Having a child often prompts people to rethink their finances, and put aside funds to help their offspring in later life, appreciate covering major expenses such as university fees.

Reorganising your finances after a divorce

Splitting household assets and property also makes people reset their goals, and seek help in putting their finances on a new path.

> How to split pensions in a divorce: The three main options explained

Starting to take an income from a pension fund

Some people want help deciding whether, and if so how and where, to buy an annuity which provides a guaranteed income for life,

There is also the option of investing a pension pot instead to fund retirement, or a hybrid solution where you buy an annuity to cover essential expenses and invest the rest, or invest to start with and then buy an annuity in later life.

Just choosing an annuity is a one-off transaction, and you can walk away from your adviser afterwards.

But investing your pension involves setting up a portfolio that needs to be managed, so you might want an ongoing relationship with an adviser – and they are likely to encourage this.

You may or may not wish to agree to this, and you should check your contract with a financial adviser for any restrictions or lock-in periods. See more on this below.

Getting advice on a final salary pension transfer

Savers are often tempted by offers from final salary schemes to give up valuable pensions, and invest their pots in the financial markets instead.

Whether this is a sensible idea will rest on your individual circumstances. As a safeguard, it is compulsory to pay for financial advice before moving a final salary pension worth £30,000-plus.

If the decision is to stay put, you will only need one-time help. But if you set up to transfer into a drawdown scheme, then as in the scenario above, you may want ongoing help.

Should you get on ongoing advice if you invest your pension in retirement?

Getting ongoing help from a financial adviser involves handing over a percentage of your pension pot every year, and many people baulk at this.

Retirement can last decades, which is a long time to fork over big sums, when not much about your circumstances or your portfolio might change from year to year.

It also means that your investment returns must ideally be good enough over time to preserve the ongoing adviser fee, in addition to absorbing investment charges and beating inflation.

One halfway house option could be to pay an adviser to set up a portfolio you are comfortable monitoring and managing yourself at the outset of retirement, and then get your investments and financial circumstances reviewed at intervals.

You could aim to do this every five years, or when there is a significant development appreciate receiving an inheritance – and perhaps use a new adviser each time, which would have the advantage of getting fresh eyes on your finances.

That said, there are important benefits to getting ongoing advice, which may turn out to be invaluable depending on your situation.

You should certainly question an adviser closely about what services they will offer that could make this worth your while, and listen with an open mind.

It’s also the case that rules and taxes change over the years, and input from an adviser can keep you on the right track and help you avoid costly mistakes.

You might consider yourself well-informed, but you won’t know what you don’t know, and what an adviser does know, until you pay up and find out.

But one other thing to bear in mind is the risk of getting tied to an adviser’s ‘own funds’ and having to use their in-house platform. Beware any exit penalties, and read more on this below. 

One-off versus ongoing financial advice: What else to consider

Justin Modray, director of Candid Financial Advice, thinks it can be sensible for people to get ongoing help in retirement but it’s their decision.

‘We don’t thrust it down their throats. It’s up to them,’ he says. ‘If it seems they will struggle we would tell them they need advice, but we would never pressure them.’

He warns that some advisers will ‘harvest’ pension investment business by putting clients in their own in-house funds and on their own platforms, and then get a cut from the fees they create as well as for ongoing advice.

‘They get as much money into their platform or fund as possible, and charge an annual fee. There are two big risks to this – high fees, and being tied to their funds and/or platform if you set up to leave.’

Modray says to avoid this, people should take one-off or ongoing advice from a firm that is willing to use an investing platform that’s available across the market, direct to consumers and to other advisers – see the box on the right.

That way, if you set up you don’t appreciate your adviser, or simply want to look after your investments yourself, you won’t be tied to your original firm and their platform. Making your investments portable, and accessible by other advisers, means you won’t be limiting your future choices.

Modray says this applies to people using financial advisers to set up investing in Isas, as well as managing investments in retirement.

‘Ask at the beginning and say you don’t want a tied platform and funds. Usually the only reason advisers do this is because it’s more profitable for them. It’s not done for the benefit of a client.’

How do you find an adviser willing to give you one-off advice?

Ask upfront, and if an adviser tries to sign you up to an ongoing deal instead, you don’t have to agree just because it might be their usual practice with other clients.

If they set something up for you, appreciate an investment portfolio, that doesn’t mean you’re obliged to hand over a percentage of your fund forever.

Hear them out in case they have valid reasons for believing it will be for your benefit, and can make a strong case for what services they can offer you in exchange, but you’re the customer and can walk away.

set up what level of service you will be comfortable with – remote, such as by phone or email, or face to face.

Also, are you happy to see a ‘restricted’ adviser, offering a smaller range of products from a provider to which they are probably tied, or a fully ‘independent’ adviser, who will look at the whole market when trying to confront your needs.

Modray warns finding an adviser who will supply help cost-effectively as a one-off could verify tricky.

‘Advice is tightly regulated, so the adviser will need to spend time collecting and documenting information, even if what you’re asking for is relatively straightforward,’ he says.

‘And being blunt, it will likely be less profitable for them versus taking on a client they will look after long term, so you may struggle to find one who will oblige.

‘Some employers supply access to pension guidance or advice for their employees, so it is well worth asking them if this is an option.’

Modray gives the following general pointers about approaching financial advisers: ‘Tell an adviser what you want. They can say no. If it’s unreasonable, you will soon know as they will all say no.

‘People can feel intimidated and scared to ask questions. Costs can be taboo. People don’t challenge costs. Never ever be afraid to challenge costs. Don’t proceed unless you comprehend the charges.

‘If they seem high, stop, think about it. Don’t proceed until you feel happy about it. Never be afraid to walk away if you don’t think you are getting a fair deal.’

Modray says people should be wary of charges of 2.5 per cent plus. He says one govern of thumb for whether costs are fair is to ask how many hours an adviser expects to spend helping you, and then work out the equivalent hourly rate. He adds that advisers might normally spend 20-30 hours tops on your case.

Modray suggests another assess is to look at the adviser’s website and see if they publish their fees, with ballpark figures for different scenarios. Those who are expensive might not do this, to avoid putting people off.

What does financial advice cost?

Henry Tapper is a retired financial adviser and founder of the Pension Playpen professional network and AgeWage, which analyses the value for money of pensions.

‘You must make it clear that this is project work and not an annual contract,’ he says regarding one-off advice.

‘Good advisers should be able to quote you a fixed price for a one-off project which won’t commit you to ongoing advice. Do not skimp on this. You should expect to pay a four-figure fee for this work and pay VAT on top.

‘A good financial adviser’s fees will typically differentiate favourably to those of solicitors and tax-advisers. Professional advice, regulated by the FCA and backed by professional indemnity insurance is worth paying for.

‘I would expect to pay £200 per hour for high quality financial advice and I would expect my adviser to advertise an hourly rate as well as quote fixed fees.

As a general tip, Tapper reckons you should be careful about letting advisers take their fees from your investments.

‘The fee may not sound very much but even 0.5 per cent to 1 per cent of your wealth can work out as expensive compared with a fixed fee.

‘Your adviser may explain that it is more efficient for them to take their fees this way (it is true that it helps you avoid VAT) but it may be better to pay VAT than find yourself locked into a long term contract.

‘Some advice firms have a lock-in period, which is fine where you use an adviser for life but is not value for money if you just want occasional advice.’

Comparison site Unbiased carriers out surveys of its financial adviser members about charges, and calculates the averages below as a guide.

Average fees for typical adviser services based on Unbiased.co.uk research