How to get financial advice – at half the price of St James’s Place

For years now, it has been almost impossible to look for a financial adviser without coming across at least one tied to St James’s Place.

The country’s largest wealth manager has expanded rapidly since it was established in 1991 and today counts over 2,500 financial advice businesses as part of its Partnership. 

Whenever one firm becomes this prominent in an industry, it is tempting to view them as the default option. But the truth is that many savers could be better off entrusting their money with firms that charge lower fees than Britain’s best-known wealth manager. 

While St James’s Place has said that independent research shows its total charges are below the market average, it has struggled to shake its reputation as a reassuringly expensive option. 

Controlling costs is one of the most important things an investor can do to improve returns. The trouble is that advisers’ fees can be incredibly difficult to untangle. Many do not openly disclose their fees, making it hard to compare costs and work out whether you are getting a good deal. 

Here, we explain how to compare financial advisers’ fees and cut your advice bill by thousands of pounds.

How do advisers charge their clients? 

There are generally three ways an adviser will charge you: by the hour, as a fixed fee or as a percentage of the funds invested, sometimes called ad valorem. Which charging structure they use will depend on the nature of the job and whether you want ongoing advice. 

Karen Barrett, founder and chief executive of Unbiased, a database of financial advisers, said an hourly fee – currently £150 on average in the UK – is more likely to be used for “quick jobs” such as moving investments. 

She added: “If your adviser is setting up an annuity or managing your investment portfolio, you may be charged a fixed fee or percentage of the portfolio’s value instead, as these jobs are more time-consuming.”

How much the adviser charges will vary depending on the type of work you require, the complexity of the job and how qualified the adviser is. 

For ongoing advice, expect to pay an initial fee and an annual fee. The Financial Conduct Authority puts the average initial charge at 2.4pc and the average ongoing annual charge at 0.8pc, but there is a huge amount of variation. According to VouchedFor, another search tool for advisers, an initial fee will usually be between 1pc and 3pc while the annual fee is likely to be between 0.5pc and 1pc.  

Is St James’s Place expensive? 

St James’s Place charges 0.5pc a year for ongoing advice, which is considered relatively low for the industry. Its initial fees, however, really pack a punch. St James’s Place charges 4.5pc for initial advice. In a survey of 20 randomly selected financial advisers, Telegraph Money found that none charged more than 3pc upfront. 

Some advisers also taper the initial advice fee depending on the size of the pot. Eight of the 20 Telegraph Money surveyed did this. 

Tapered fees are far more cost effective for wealthier investors. Someone with a pot worth £500,000 would pay £5,000 in upfront fees if the charge was 1pc, compared to £22,500 if the fee was 4.5pc. 

Bear in mind that advice fees are not the only fees you will have to pay – there will also be fund managers’ fees and platform fees to cover. 

St James’s Place’s clients typically pay between 1.6pc and 1.9pc when underlying fund fees are factored in. In October 2023 the company announced plans to change its charging structure, although the changes will not take effect until 2025.

How can you cut costs? 

1. Consider a fixed fee model

Annual fees will, over time, have an erosive impact on your returns. So it is worth asking yourself whether you definitely need ongoing advice, or if what you are looking for is really one job that could be completed for a fixed fee. According to Unbiased, at-retirement advice on a £250,000 pension pot will cost £3,000 on average, while consolidating pension pots with a total value of £500,000 will cost £5,000. 

2. Shop around 

Because advisers’ fees can vary so much, it is vital you shop around and get quotes from at least three, rather than going for the first adviser you meet. Many will offer free initial meetings.

3. Use your allowances 

The pensions advice allowance lets you withdraw £500 from your pension tax-free to pay for retirement advice. You can use the allowance only once in a tax year and a maximum of three times. However, not all scheme providers can facilitate the allowance, so you will need to check with your provider. 

Your employer can also put £500 towards pension advice, under the employer-arranged pensions advice “exemption”. Used in conjunction with the pensions advice allowance, this would allow you to reduce your advice fees by £1,000 in one year. 

4. Consider a ‘robo-adviser’

So-called “robo-advisers” have sprung up over the past few years. They offer automated advice that is usually most useful if your finances are fairly basic. These services are likely to offer you better value for money if all you want is an investment portfolio adjusted to your risk level. 

Firms such as Wealthify and Nutmeg will place you into one of a handful of portfolios based on whether you describe yourself as a “cautious” or “adventurous” investor. Fees are much lower as a result. 

Wealthify charges an annual fee of 0.6pc and an average investment fee of 0.16pc. Nutmeg charges 0.75pc up to £100,000 and 0.35pc on the portion above this threshold. 

For fixed allocation portfolios, with no intervention from the investment team, it is 0.45pc and 0.25pc respectively. Investment fund fees vary between 0.2pc and 0.36pc. 

This article is kept updated with the latest information.

Do you use St James’s Place or another adviser? What have your experiences been, good or bad? Let us know at moeny@telegraph.co.uk or in the comments below.