Choosing a Financial Adviser
What will financial advice cost?
You may pay for independent financial advice through fees, commission or a combination of the two. Fees usually mean that you pay a fixed amount to the IFA up front, depending on how complicated your advice needs are, or sometimes an hourly rate.
Commission usually means you don't pay the adviser any money directly. Instead, the provider of any financial products you buy pays commission to the adviser and deducts the cost from the value of your product. The cost of the commission is taken into account in the charges you pay under your product, together with the other costs of setting up and operating the plan.
Tax is another issue. VAT is payable on fees, but not on commission payments. However, your IFA may give back to you part of the commission he receives. If so, you may be liable to income tax on the amount you get back.
Since mid-2004, independent financial advisers have been required to give you the option to pay by fee if you want to. Tied advisers and multi-tied advisers are not required to offer you this choice. However, after stipulating a fee, IFAs may take the fee out of the commission generated by any product you purchase. Any commission over and above the fee already stipulated would be rebated to you.
Introduction
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