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How much does a financial advisor cost in Ireland? Thumbnail

How much does a financial advisor cost in Ireland?


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Introduction


In our experience most people don't really know what they are paying for their investments and pensions and the advice cost is very often "bundled in" to an Insurance Contract making getting to the bottom of the real cost virtually impossible (especially for pension contracts)


Listen to Personal Finance Journalist,

Jill Kerby, who has been a client of ours since 2008, talking money on RTE Drivetime 

The real cause of the issue is that the vast majority of financial advisers in Ireland today are still paid by commission for selling Insurance Company products.

Since EU regulations intended to inform consumers do not apply to Irish Insurance-based Pension contracts it is therefore almost impossible to determine what you are really paying.

However, the same EU regulations do apply to personal investment contracts and a search for  "Key Information Documents" gives an insight into the likely cost.

For example Irish Life contracts can be found here

So, for example, starting at the top of the list if you were to purchase an Irish Life Portfolio Invest Bond via one of the AIB tied agents who must sell you an Irish Life product and can't advise on any other, the disclosed fee is 


So we can see that AIB must be taking a high upfront commission and Irish Life protects its own interests by applying an early surrender penalty over the first few years.

You can see that even after year 4 the ongoing annual charge is still in excess of 2%pa finally reducing to 1.66%pa in year 7 once the impact of the initial commission payment has been recovered.

To independently corroborate these figures, we can use  a  Department of Social Protection study which found that investors are paying average annual fees of 2.1%.

Allocation Rates 


We frequently hear of investors being told that they are receiving a better allocation rate and that therefore the charges are being reduced. Of course there is no such thing as  free lunch and in reality these are just part and parcel of a generally opaque pricing structure which is deliberately designed to hide the true costs.

The effect of increased allocation rates is of course to increase the number of units purchased at the outset but what is often overlooked is that this increased fund value is subject to an annual management fee and therefore the Insurance Company immediately begins to claw back some of this benefit.


100% Allocation Rate 2% annual charge 105% Allocation Rate 2% annual charge
€100,000 x 2% = €2,000 charge in year one €105,000 x 2% = €2,100 annual charge in year one


Simplified for illustrative purposes

Finally, we  frequently see examples  of investors who have taken advice only to find that the financial adviser is hiding very high commission payments via unregulated products. 


Regulation

There are different types of regulation of Financial Advice in Ireland and it makes sense to compare these to get a better sense of the sort of Financial Advisor you are really looking for.

 

 

High Street Bank Advice 

Insurance Brokers Insurance Mediation Regulations (IMR)

Investment Intermediaries 

Investment Intermediaries Act 1995

 (IIA)

Stockbrokers

(Markets in Financial Instruments Directive (MIFID)

Global Wealth

(IMR and IIA)

Can advise on the whole market including international options?

NO – typically tied to a single insurance company

NO – IMR only covers Insurance Companies

YES – including stocks listed on a regulated exchange

Typically provide their own investment services and own investment funds

YES

Paid by commissions

YES

YES

Typically, YES

Typically generate trading commissions

NO

Customise portfolios for client’s tax status

NO

NO

Rarely

Sometimes

YES

Fee-only

NO

NO

NO

NO

YES

 

How can you find Independent Financial Advice in Ireland? 


The Central Bank of Ireland recently changed the rules around disclosure of commissions but stopped short of a ban on investment commissions due to considerable lobbying on the part of the incumbent providers. Almost no Financial Advisers in Ireland today can describe themselves as Independent.

We are not Financial Brokers since our business is exclusively conducted on the basis of customer agreed remuneration and/or via an asset under advice fee and we do not receive any third party commissions.

Our Financial Planning Core Services


All our clients receive our core services. These ensure you are on track to reach your future goals and aspirations.

In all cases, our minimum fee for Financial Planning is €500 plus VAT

 

Our Optional Financial Planning Services


OPTIONAL FINANCIAL PLANNING SERVICE

ADDITIONAL FEE

Retirement Planning Strategies

Review of your current retirement provision for adequacy and tax efficiency including review of your current occupational pension scheme and recommendations for AVCs/added years

€200 per scheme

Debt analysis

Review of your current loans and consumer debts

€200 per loan

Planning for school fees

Building a strategy to meet future school fees and higher education costs

€200 per child

State Pensions

Analysis of your current entitlements and recommendations for strategies to potentially improve State Pension benefits

€200 per client

Review of deferred Irish Defined Contribution Schemes

Consideration of adding to your current occupational scheme, remaining a deferred member or transferring to a Buyout bond or PRSA. Note additional fees are payable for international pension transfers and advice in respect of incorporation of a sole trader and or establishing an Executive Pension (see wealth management below)

€500 per scheme

Helping relatives into property

Helping children and or grandchildren to get a foot on the property ladder

€200 per purchase

Gifting

Gifting money through the generations to provide rewards now and reduce inheritance tax

€200 per child



Our Wealth Management Services


Please note that our minimum fee for Wealth Management is €2,500 plus VAT  see Terms of Business for more details.

For more details please see Our Remuneration.


Our guide to choosing an adviser in Ireland can be found here




You may also be interested in our analysis of the returns of actual client accounts over the last 10 years in this post or this guide