Financial advice is expensive, right? The cost of a professional trained individual, working for a Chartered Financial Planning practice, sitting down with you, helping to identify your aims and objectives, explain the nature and value of your financial plans, and showing you the steps you need to take to get on track, must cost quite a bit, no?
Maybe not. Hagreaves Lansdown, the ‘discount’ platform today launched details of its new, ‘unbundled’ pricing. The background is not overly relevant, other than it will not have been clear to most people how each relevant party was charging for services: the fund manager, HL as the platform, and if chosen, advice, would all be separately costed.
For an “average” 1 individual, with £200,000, investing in one of HL’s preferred list – the Wealth 150 – the total cost with no advice will be 0.45% for the platform and 0.65% for the funds – a total of 1.10% each year (ignoring any hidden manager expenses). Wingate Financial Planning would give full Financial Planning advice to the same individual for a total of 1.32% p.a. – this includes, platform, advice, and a range of passive funds. Put another way, face-to-face advice costs £440 p.a. extra.
Granted, comparing the tools that Hargreaves Lansdown offer to help you select the ‘best of breed’ active funds, and our passive funds is somewhat “apples and pears”, but I would be interested to know how many self-managed ‘active’ investors choose funds that are: appropriate to their attitudes to risk (read: likely to lose more than they can afford if the market falls) and actually performing better than a similar risk passive portfolio over the longer term (read: it’s easier to buy the historic winners, than sack the potential future losers!).
1 please excuse the excessive use of the word average, but the nature of choices made by individual and adviser alike can of course change these figures for better or worse. By average, we take this to mean average risk, averagely diverse selection of funds etc.
Wingate Financial Planning, for those that want to pay the extra, also offers active management, tax and long-term cashflow planning, reviewed at least annually. Our total cost comes in at around 1.96% p.a. for the same client above. Adding Hargreaves’ current advice costs of 0.6% p.a. inclusive of VAT, gives an approximate total of 1.70% p.a. Of course real world results may vary, but the assumption that going direct is cheaper is certainly not made.