Why it pays to access financial advice – and why more families can now do so low-cost

Millions of people make important decisions about their finances without needing any professional help; This is mostly because regular financial advice has traditionally been inaccessible to those without significant savings.

But this may be starting to change. The new rules mean larger financial firms can offer bespoke support to clients free of charge, as consultancy firms are increasingly trialling lower-cost services.

Only nine per cent of adults in the UK currently seek financial advice, according to the financial watchdog’s latest estimates.

This has caused the so-called advice gap to widen between wealthier people who can access professional help and those who are forced to make complex financial decisions on their own; However, it may now be possible for millions more people to benefit from lower-cost services.

New research shared privately Independent A study from digital consulting firm Dynamic Planner found that 54 percent of consulting firms are currently exploring lower-fee or fixed-fee consulting offerings, while two-fifths (41 percent) offer low-cost or free guidance services.

Benefits of advice

While many families believe they won’t benefit from the advice or get a refund, the data shows otherwise.

According to research from the International Longevity Centre, the average household that receives financial advice is £48,000 better off in terms of retirement and other investments than those who receive no advice at all.

Even a small increase in the return on your money can snowball over time.

If you put £10,000 into a savings account paying 4 per cent interest tomorrow, you would have £32,434 after 30 years.

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If you invest that money in the stock market and earn an average return of 7.5 per cent, you’ll have £66,144 after 30 years, plus even a one per cent annual consultancy fee. The FTSE 100 has returned around 7.4 per cent per annum over the last 10 years.

But it’s not just about investment performance. Financial advisors have access to a wide range of information and products that can leave you better off in the long run.

Martin Rayner, financial advisor at Compton Financial Services, said: “Financial advice for the typical household can definitely be worth it because the biggest benefits are often about avoiding expensive mistakes and building long-term financial security.

“A good advisor can help families use their budgets more effectively, use tax deductions properly, put in place the right protections, make consistent investments, and create a realistic financial plan around goals such as buying a home, retiring comfortably, or financially supporting children.”

Low-cost referral offers

Historically, financial advisory firms would charge clients a percentage of their total investment on a regular basis, usually once a year. For example, a regular 1 percent fee on all money the firm manages.

But companies have begun offering new offerings where customers can pay a single flat fee, a single upfront percentage cost, or a much lower ongoing fee.

In the past, consulting firms said they couldn’t afford to do this because the cost of running consulting work was high and the firms had to devote time to higher-paying clients.

However, artificial intelligence, along with other changing technologies, has begun to make it possible for companies to reach more people at lower costs.

Mr Rayner said: “Historically cost has been a barrier for some households, but AI and better technology are helping to make advice more affordable and accessible by reducing administration and improving efficiency, allowing firms to support a much wider range of families.”

Consultancy firm Becketts is the firm that has created a new low-cost offering. New firm Becketts Connect targets anyone with a minimum of less than £300,000.

He charges an initial fee of £495 for his services, which include a biannual financial plan and review, and is available to answer questions when necessary.

Mark Brown, who runs the firm, said: “These clients don’t need to meet two or three times a year, they just need someone to help them make decisions. This allows us to charge just £25 a month and help many more people.”

Advanta is another consultancy that has launched Advanta Direct, a cheaper offering that typically charges a minimum annual fee of £1,000 to manage clients’ savings and investments.

Mark Pearson, Advanta Wealth Managing Director, said: “We use technology to communicate with clients and monitor their needs, so if there is a time or life event that requires full advice, we can offer them access to Advanta Wealth (full advice).”

Free financial support

A new type of free financial support was launched earlier this year for those who can’t or don’t want to pay for financial planning.

Financial firms such as banks, pension providers and investment platforms can now offer “targeted support” recommendations designed for groups of customers with similar characteristics, rather than fully personalized financial advice.

This support is expected to provide investment and retirement assistance to approximately 18 million people.

Royal London and Quilter are two firms that have already received approval to launch their own targeted support services, offering customers free tailored advice tailored to their situation.

You should contact your bank or financial services provider directly to see if they offer targeted support or will do so in the near future.

When investYour capital is at risk and you may get back less than the amount you invested. Past performance does not guarantee future results.