Financial Advice Fees: Percentage vs Fixed Fees
Published / Last Updated on 13/03/2026
Why do financial advisers charge a percentage of investments? Are fixed financial advice fees cheaper?
What Changed After the FCA's Retail Distribution Review (RDR)?
- RDR took effect in January 2013.
- Advisers must quote a fee for pension and investment advice.
- Insurance and non‑advised investment sales can still pay full commissions.
- Advisers must hold at least Level 4 qualifications and work toward Level 6 Chartered status.
- Many banks and insurers closed their advice arms and moved to non‑advised, commission‑based sales.
- Many advisers continued charging percentage‑based fees, simply disclosing them differently.
Percentage‑Based Advice Fees
How % Fees Work
- Initial and ongoing advice is charged as a percentage of your investment value.
- Initial fees typically 1%–3% of your wealth.
- Ongoing fees typically 0.5%–1% per year.
- Minimum fees often apply.
- Fees are in addition to product and platform charges.
- This is the most common charging model in the UK.
Advantages of % Fees
- Lower cost for people just starting to invest or with £10,000–£50,000.
- Smaller portfolios are effectively subsidised by larger ones.
Disadvantages of % Fees
- More expensive once you have £50,000+ invested.
- Fees can be opaque and harder to calculate.
- Two clients receiving the same service can pay very different amounts.
- Some advisers decline clients with small portfolios.
Fixed, Set and Structured Fees
How Fixed Fees Work
- Advice is charged at set amounts, not linked to portfolio size.
- Initial advice typically £500–£3,000 depending on complexity.
- Ongoing advice typically £500–£3,000 per year.
- Fees are in addition to product and platform charges.
- Only a small minority of advisers use this model.
Advantages of Fixed Fees
- Initial fees often similar to %‑based fees.
- Cheaper for clients with £50,000+ invested.
- More of your money stays invested, improving compound growth.
- Advisers treat all clients equally regardless of portfolio size.
- Fees are transparent, easy to compare, and easy to value.
- You don’t pay more simply because your investments have grown.
Disadvantages of Fixed Fees
- Can be expensive for new investors or those with small portfolios.
Impact on Investment Growth: % Fees vs Fixed Fees
Example: £200,000 Invested
Assumptions:
- No initial product charge
- Growth 5% per year
- Fund management charge 1% per year
- Inflation 2% per year
- % adviser fee: 3% initial + 1% ongoing
- Fixed‑fee adviser: £2,937 initial + £551 ongoing (inflation‑linked)
Outcome After 20 Years
- %‑based adviser: £425,077
- Fixed‑fee adviser: £501,819
Difference: £76,742 more with fixed fees.
Why the Difference Grows Over Time
- Percentage fees rise automatically as your portfolio grows.
- Fixed fees stay broadly stable, so more money remains invested.
- Compounding magnifies the gap in fund growth each year.
| £200,000 Invested | No entry charge, mid rate growth 5% pa less fund management charge 1% pa. | Inflation 2% pa | ||||
| % Based Adviser | Inv. Value | Our Flat Fee Route | Inv. Value | |||
| Less Initial IFA Charge | 3% | £194,000 | Less Initial IFA Charge | £2,937 | £197,063 | |
| IFA Annual Advice Charge pa | 1.00% | IFA Annual Advice Charge pa | £551.00 | |||
| End Year 1 | 1.00% | £201,760.00 | End Year 1 | £551.00 | £206,365.15 | |
| End Year 2 | 1.00% | £209,830.40 | End Year 2 | £562.02 | £216,132.41 | |
| End Year 3 | 1.00% | £218,223.62 | End Year 3 | £573.26 | £226,377.01 | |
| End Year 4 | 1.00% | £226,952.56 | End Year 4 | £584.73 | £237,122.60 | |
| End Year 5 | 1.00% | £236,030.66 | End Year 5 | £596.42 | £248,394.00 | |
| End Year 6 | 1.00% | £245,471.89 | End Year 6 | £608.35 | £260,217.28 | |
| End Year 7 | 1.00% | £255,290.77 | End Year 7 | £620.52 | £272,619.80 | |
| End Year 8 | 1.00% | £265,502.40 | End Year 8 | £632.93 | £285,630.27 | |
| End Year 9 | 1.00% | £276,122.49 | End Year 9 | £645.58 | £299,278.86 | |
| End Year 10 | 1.00% | £287,167.39 | End Year 10 | £658.50 | £313,597.22 | |
| End Year 11 | 1.00% | £298,654.09 | End Year 11 | £671.67 | £328,618.58 | |
| End Year 12 | 1.00% | £310,600.25 | End Year 12 | £685.10 | £344,377.85 | |
| End Year 13 | 1.00% | £323,024.26 | End Year 13 | £698.80 | £360,911.64 | |
| End Year 14 | 1.00% | £335,945.23 | End Year 14 | £712.78 | £378,258.42 | |
| End Year 15 | 1.00% | £349,383.04 | End Year 15 | £727.03 | £396,458.56 | |
| End Year 16 | 1.00% | £363,358.36 | End Year 16 | £741.57 | £415,554.46 | |
| End Year 17 | 1.00% | £377,892.70 | End Year 17 | £756.40 | £435,590.61 | |
| End Year 18 | 1.00% | £393,008.40 | End Year 18 | £771.53 | £456,613.73 | |
| End Year 19 | 1.00% | £408,728.74 | End Year 19 | £786.96 | £478,672.89 | |
| End Year 20 | 1.00% | £425,077.89 | End Year 20 | £802.70 | £501,819.57 | |
Key Takeaways
- Initial fees are often similar across both models.
- Ongoing fixed fees usually result in higher long‑term investment values.
- Always ask advisers for actual £ amounts, not just percentages.
- A quote of “3% initial” is far less transparent than “£2,937 initial fee”.
FAQs
What is the main difference between % fees and fixed fees?
Percentage fees scale with your investment value; fixed fees are based on time, complexity, and service—not portfolio size.
Are fixed fees always cheaper?
Not always. They tend to be cheaper for investors with £50,000+, but percentage fees can be cheaper for beginners.
Why do percentage fees become expensive over time?
Because as your investments grow, the fee grows automatically, even if the adviser’s work does not.
Do fixed‑fee advisers still charge for ongoing service?
Yes. Ongoing fixed fees cover annual reviews, portfolio oversight, and advice—but the cost does not rise simply because your investments have grown.
Why do some advisers prefer percentage fees?
They generate higher long‑term revenue and scale automatically with client wealth.
How can I compare advisers fairly?
Ask for the actual £ cost of initial and ongoing advice over 1, 5, 10, and 20 years. Avoid relying on percentages alone.
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