Do you need a financial advisor or asset manager?

The looming budget with its warning of high taxes has many families wondering where they can get financial help.

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

But everyone, regardless of their wealth, should seek expert 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 create a financial plan for a client. They’ll look at the ins and outs of your income and outgoings to create a roadmap of your savings for the next five to 10 years and tell you how to maintain financial growth, says Moneybox’s Brian Byrnes. They’ll take into account your life goals, tax position and family needs.

He explains: ‘They tell you how much you can save and where you can put that excess income. They come into their own in your pension, so they help you draw down your pension and make sure you don’t run out of money.’

Financial planners generally do not provide investment advice and do not manage your money on an ongoing basis.

You don’t have to have amassed enormous wealth to be able to talk to them.

FINANCIAL ADVISOR

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

They can advise you on a wider range of financial matters – beyond just investments – than financial planners or asset managers, for example on insurance products, equity withdrawals or mortgages.

Importantly, they can help you avoid costly mistakes, such as buying the wrong financial product or falling for investment fraud.

According to Holly Mackay, director of investment website Boring Money, many advisors have a minimum threshold that your total assets must exceed before they will work with you.

She says: ‘If you’re considering taking traditional financial advice, you should have a minimum of £75,000 to £100,000 in investments or pensions. That’s the average minimum amount 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 manages the money you have invested and is usually more hands-on with investments than a financial advisor. They focus on investments but consider your goals and future 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 taken over by a wealth manager, but some leading firms ask clients to have a minimum of £3 million.

WHERE TO FIND ADVICE

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

Check out websites like Unbiased and VouchedFor. There you can see which one suits you best, depending on how much money you have and what you are looking for.

According to Alex Whitson of VouchedFor, it’s important to choose someone you can build a relationship with and who has the right expertise to help you achieve your financial goals.

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

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

FIRST SESSION IS FREE

Your first financial consultation is usually free. This introductory meeting gives you the chance to decide whether you feel confident taking advice from this person.

During the conversation you can ask general questions about your finances, explain your financial situation and that of your family and indicate what steps you may need to take.

According to VouchedFor, a consultation usually takes about 30 minutes. To get the most out of your financial consultation, it is best to make an overview of your current financial situation (savings, debts, income, expenses) and future plans.

If the financial advisor identifies areas that require more detailed attention, they can give you a clear price and proposal. There is no obligation to proceed with that proposal.

Before your first conversation, think about your goals, your current financial situation and how much risk you are willing and able to take with your investments.

Grimsditch advises having a number of initial discussions with different advisors before making a decision.

Independent financial advisors are not required to list their fees on their website, so you may need to have one of these initial conversations before they can give you an accurate quote.

They have to assess your financial situation.

FUTURE COSTS

It can be difficult to calculate exactly how much financial advice will cost you, especially because rates vary greatly from advisor to advisor.

The costs depend on various factors, such as the time needed to manage your assets, provide advice and the size of the assets involved.

Some advisors charge a flat fee, others charge an hourly rate, and still others charge a percentage of the assets under management.

Whitson warns that the company must be completely transparent and that you must understand the costs before committing to anything.

According to Unbiased, advisors often charge 1 to 2 percent of the assets in question, such as a pension fund. Lower percentages apply to larger assets.

This means that there may be higher fees for smaller assets. Each advisor is different, but they should be happy to discuss their fees up front.

According to MoneyHelper, if you pay an hourly rate you can expect to earn between £75 and £350 per hour.

According to VouchedFor, the average hourly rate is around £196.

Your costs will largely depend on the size of your assets and the complexity of your situation. For example, creating a financial plan with £100,000 in investments and receiving ongoing advice on it for five years will cost you an average of £7,597 – £2,795 upfront and £4,802 in ongoing costs, says VouchedFor.

Similarly, merging three pension pots totalling £500,000 and receiving ongoing advice on them would cost £27,868 over five years – £8,881 up front and £18,987 in ongoing costs.

While this may seem like a high price, the investment returns and tax savings from the advice can offset the cost.

For example, Unbiased’s Value of Advice report found that people who sought advice about retirement savings early in their careers saved an average of £34,300 more than those who didn’t.