Do you need a financial advisor or wealth manager?

The looming budget with its warning of punitive taxes has left many families wondering where to get financial help.

Yet few of us seek professional advice – just 8 per cent – ​​according to the Financial Conduct Authority (FCA), perhaps because the world of financial advisers and wealth management is seen as the exclusive domain of the ultra-rich.

But everyone, regardless of their assets, should seek specialist financial advice, says Tim Grimsditch of advice comparison website Unbiased.

Here we explain the difference between financial advisors, financial planners and wealth managers, and how much each will cost you.

FINANCIAL PLANNER

A financial planner will draw up a financial plan for a client. They will analyse the details of their income and expenses to create a roadmap for their savings over the next five to ten years and tell them how to maintain financial growth, says Brian Byrnes of Moneybox. They will take into account their life goals, tax situation and family needs.

He explains: “They will tell you how much you can save and where you can put that excess income. They are very useful in retirement as they will help you to withdraw your pension and make sure you don’t run out of money.”

Financial planners typically do not offer investment advice or manage your money on an ongoing basis.

You don’t need to have accumulated large amounts of wealth to talk to them.

FINANCIAL ADVISOR

A financial advisor will help a client with a specific financial challenge or when advice is required over a longer period. They will typically manage your money and recommend investments you should make, while also looking at your tax and legal situation.

They can advise you on a broader spectrum of your finances, beyond investments, than financial planners or wealth managers, for example on insurance products, equity release or mortgages.

Importantly, they can help you avoid costly mistakes, such as purchasing an unsuitable financial product or falling for an investment scam.

Holly Mackay, chief executive of investment website Boring Money, says many advisers have a minimum threshold that your total assets must exceed in order for them to work with you.

She says: ‘If you’re considering traditional financial advice, you really should 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 receiving advice has more than £150,000 in assets under advice.

ASSET MANAGER

A wealth manager will manage the money you have already invested and will typically be more involved in investments than a financial advisor. They will focus on investments but will take into account your future goals and needs from a legal and tax perspective.

Byrnes says clients typically need to have a minimum of £250,000 saved for retirement or in investments that a wealth manager will take care of. However, some high-profile firms ask clients to have at least £3m.

WHERE TO FIND ADVICE

There are currently over 40,000 mortgage and financial advisers working across the UK.

Check out websites like Unbiased and VouchedFor that will allow you to see which one is best for you, depending on how much money you have and what you are looking for.

VouchedFor’s Alex Whitson says the key is to choose someone you can build a trusting relationship with and who has the right experience to help you achieve your financial goals.

He explains: ‘If you want someone to assess your finances holistically and advise you on investment products and pensions, a financial adviser or financial planner could be an option.’

Next, check whether a firm is regulated. You can contact the website that put you in touch with the advisor or the FCA website. For example, VouchedFor can tell you whether they are regulated and, where possible, check that the advisors have the appropriate qualifications.

THE FIRST SESSION IS FREE

Typically, your first financial consultation will be free. This introductory meeting will give you the opportunity to decide if you feel confident receiving advice from this person.

During the meeting, you can ask general questions about your finances, explain your and your family’s financial situation, and identify what steps, if any, you need to take next.

According to VouchedFor, the meeting usually lasts around 30 minutes, and to get the most out of your financial consultation, you should prepare a summary of your current financial situation (savings, debts, income, expenses) and future plans. If the financial advisor identifies areas that require more detailed attention, they will be able to offer you a clear price and proposal. You will not be obliged to proceed with that proposal.

Before attending your 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 scheduling a few initial meetings with different advisors before making a decision.

Independent financial advisers are not required to display their fees on their websites, so you may need to have one of these initial meetings before they can give you an accurate quote.

This is because they will need to assess their financial situation.

FUTURE COSTS

It can be difficult to figure out exactly how much financial advice will cost you, especially since fees vary widely from advisor to advisor.

Fees will be based on several factors, such as the time it will take to manage your assets and prepare the advice and the size of the assets involved.

Some advisors charge a flat fee, others charge hourly, and some charge a percentage of assets under management.

Make sure the company is completely transparent and that you understand the costs before you commit to anything, Whitson cautions.

According to Unbiased, advisors typically charge between 1 and 2 percent of the asset in question, such as a pension fund, and lower percentages for larger assets.

This means that higher fees may apply for smaller assets. Every advisor is different, but they should be willing to discuss their fees up front.

With hourly rates, you can expect to pay between £75 and £350 per hour, says MoneyHelper.

The average hourly rate is around £196, according to VouchedFor.

Costs will largely depend on the size of your assets and the complexity of your situation. For example, creating a financial plan involving £100,000 worth of investments and receiving ongoing advice on it for five years will cost you an average of £7,597 – £2,795 up front and £4,802 in ongoing charges, according to VouchedFor.

Similarly, consolidating three pension pots totalling £500,000 and receiving ongoing advice on them will cost £27,868 over five years (£8,881 upfront and £18,987 in ongoing fees).

While this may seem like a high cost, the investment returns and tax savings generated by the advice could offset the outlay.

For example, Unbiased’s Value of Advice report found that those who received pension saving advice near the start of their careers saved an average of £34,300 more than those who did not.

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