This is the question I am asked more than any other, often before someone has even told me what they need help with. It is a fair question, and the industry has not always answered it plainly. So here is how it works.
The three ways advisers in Ireland are paid
Every regulated financial adviser in Ireland is paid in one of three ways, or a mix of them.
The first is commission. When you take out a pension, an investment or a life cover policy through an adviser, the product provider pays the adviser a percentage of your premium or contribution. You do not write a cheque to the adviser. The cost is built into the charges on the product, which you would pay anyway if you went to the provider directly.
The second is a fee you pay directly. Some advisers charge a fixed amount for a written financial plan, a pension review or a retirement income plan. Others charge by the hour. The amount is agreed before any work starts.
The third is a percentage of assets under advice. If an adviser looks after an investment portfolio or an ARF for you on an ongoing basis, they may charge an annual percentage of the fund value, typically taken from the fund itself.
Many advisers, including me, use more than one of these depending on what you need.
What commission actually means for you
Commission is not free money. It comes out of the product, so it affects the charges you pay over time. What matters is that you know what those charges are and what the adviser receives. Under the Central Bank's Consumer Protection Code, an adviser must disclose any commission before you sign anything. On this website you will find the commission arrangements we have with each provider we use, published in the footer.
Commission suits people who want advice on a specific product and do not want to pay upfront. It suits people less well when they need a broad plan and are not ready to buy anything, because there is nothing for the adviser to be paid on. That is where a fee makes more sense.
What fee-based advice looks like
A fee-based financial plan is a piece of work in its own right. You give the adviser a full picture of your income, savings, pensions, protection, mortgage and goals, and you get back a written document that sets out where you stand, what your options are and what to do next. You are paying for the analysis and the recommendation, not for a product.
The advantage is independence: the adviser has no reason to steer you towards anything. The disadvantage is that you pay whether or not you act on the plan.
What we charge
I would rather tell you than have you guess. Future Financial Planning is paid by a combination of fee and commission, which is how most advisory firms in Ireland work.
If you choose to deal with us on a fee basis, the rate is €300 an hour for my time and €100 an hour for support staff, and you get an estimate in writing before we start. Where a product provider pays us commission on a pension, policy or investment we arrange for you, that commission is offset against the fee. If the commission is more than the fee, the commission is what we receive and there is nothing further to pay.
Commission is capped by product type. On a pension it is up to 5% of the annual contribution, or up to 25% of the initial contribution under an initial and renewal model. On protection policies it is up to 180% of the first year's premium. On investment bonds, annuities and ARFs it is between 2% and 5% of the amount invested. The full schedule is on our fees and remuneration page, and the arrangement we have with each provider is published in the footer of this site.
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One more thing you should know. For life assurance, protection, investment and PRSA business, Irish Life is our preferred product provider and our analysis is limited to their products. We also hold appointments with Zurich, Aviva, New Ireland and Royal London, and our mortgage advice is on a fair analysis basis. That is set out in our Terms of Business, which you receive before any work starts, and it does not change afterwards.
Five questions to ask any adviser about cost
Ask these before you engage anyone, including me.
- How are you paid for this work, and how much will you receive?
- If it is commission, how does that affect the charges on the product?
- If I do not go ahead, is there anything to pay?
- Are you independent, or tied to particular providers?
- Can I have that in writing?
A good adviser will answer all five without hesitation. If the answers are vague, walk away.
Is it worth it?
That is a separate question and I have written a full answer to it: Is a financial adviser worth it? An honest answer from one. The short version is that advice pays for itself most clearly when you have more than one pension, when you are within ten years of retirement, when you own a business, or when other people depend on your income. If your finances are simple and you are happy managing them, you may not need it, and I will tell you so.
If you would like to know what advice would cost in your situation, get in touch and we will tell you before anything else happens.