How much the advice will cost?
Charges can vary depending on the type of advice you are getting. Financial advisers generally get paid by:
- Commission – Financial advisers giving independent investment advice cannot accept and retain fees, commissions, or any monetary or non-monetary benefits from the business they sell investment products on behalf of. Where the financial adviser receives payment or a bonus from the financial service provider whose products they sell. There are two main types:
- Standard commission – this is a percentage of your investment that your financial adviser receives as a lump sum when you first buy the financial product.
- Fund-based trail commission – this is a yearly percentage of the overall value of your fund and is sometimes called trail commission.
- Fees – where you pay the financial adviser directly. Fees can include:
- Fund management/administration charges – these are charges for administering the fund and other services such as maintaining a record of your fund, calculating the value of the fund each day and providing ongoing advice. These fees are generally charged annually and are applied regardless of whether the fund performed well or not.
- Performance fees – these are fees you may have to pay if, for example, your investment makes a certain profit. A performance fee can be calculated in many ways, but the most common is as a percentage of the investment profit made.
- Early encashment fee – this is a penalty you may have to pay if you cash in your savings or investments before they mature.
Whether you pay a fee or commission, or both, will depend on the type of advice you are getting. Ask your adviser to explain what you are paying for. If you are getting investment advice, ask your adviser if the costs include a review of your investments from time to time or if you must pay for that service separately. Before you avail of financial advice, you must be given a document listing all charges in a way that is easy to understand.