How much are clients willing to pay for financial advice?
A yawning gap is growing between the price independent financial advisers think they are worth and the price consumers are prepared to pay.
While around two thirds of IFAs reckon they should charge between £150 and £200 an hour, half of consumers are not willing to pay anything, while the rest think a capped fee of £300 is more than enough.
The shock appreciation of their worth to customers for IFAs comes from a study by the Association of British Insurers (ABI).
From a survey of 2,500, more than half said they were unlikely to pay for financial advice, although the current average cost is £670.
Helen White, the ABI’s acting director of life and savings, says: “The results send us a strong message about what consumers need: to fill the gap between paying for full financial advice and having none.
Some IFAs charge up to £350 an hour
“For the RDR reforms to deliver good outcomes for consumers and the industry we need to convince sceptical consumers full advice is worth paying for, and also come up with a model of simplified advice for those consumers who cannot afford or do not need full financial advice.”
Meanwhile, research by IFA services firm threesixty concluded 60% of IFAs charge clients between £150 and £200 an hour for advice
Only 18% of threesixty member firms charge less than £150 per hour.
A quarter said they offer a fee option charge of £150, with 11% charging £175 and 13% £200 per hour. Another 14% offered rates at other levels between £150 and £200.
About 7% of those asked charge £250 an hour, 3% charge £300 and 1% as much as £350.
Another 5% charged fixed amounts between £210 and £295, with 3% offering a variety of ranges between £120 and £250.
What is a good paraplanners worth?
The value of paraplanners to IFAs has also come under the microscope of recent research by threesixty.
The data showed that the most common hourly fees charged for paraplanners were between £75 and £100, with 14% of firms charging the former and 14% the latter.
The range of fees was broad – from no charge (4% of firms) to £185 (1% of firms), with 11% of firms charging between £40 and £65, 24% charging between £80 and £95, and 27% charging between £110 and £175.
Phil Young, Commercial Director at threesixty, said: “The wide disparity in hourly rates charged for paraplanners reflects the broad range of their roles and regional variations in salaries, skills and functions.
“Sometimes paraplanners are highly qualified but lower profile back office staff within firms, and sometimes they are treated as the equal of advisers and meet with clients directly. But paraplanners are playing an increasingly important role in IFA firms, making the key decisions on which funds, products and tax solutions are used.“