The advantages and disadvantages of time-costed fees versus percentage fees

The total amount you’ll pay for financial advice normally depends on the type of advice you need and how complex your needs are.

Time-costed fees versus Percentage fees

One of the most common charging structures are percentage fees, which usually sit between 1% and 3%. For larger portfolios, relatively high costs can be expected.

For example, if someone invested £500,000 the set-up fee could be as much as £5,000.

Time-costed, or hourly fees, are based on the time taken to do the research and to prepare and present recommendations.

For example, assuming a typical hourly charge of £350, the same £500,000 investment may cost £1,600 - £1,800.

For this client the savings on a time-costed basis could be as high as £3,200.

For smaller investment amounts, the same time costing would be applied, however, typically these do take less time.

How does Dentons Wealth operate?

At Dentons Wealth, we operate on a time-costed basis. Costs would be estimated in advance, and clients would be presented with a clear fixed charge that will not increase if the amount being invested was to increase. However, with a percentage-based charge, the charge would increase.

For example, if the investment amount increased to £520,000, the fee would increase from £5,000 to £5,200.

Percentage fees scale with your wealth, while time-costed fees align purely with the amount of work required.

For most clients there is enormous value and transparency in the time-costed model vs the typical percentage methodology.

It is important to note that time-costed fees are charged for the work done and are not based on the transaction. This means if a client agrees to our advice but does not proceed, fees will still be charged for the work undertaken.

Typical ongoing Adviser fees are around 1% of the funds under management. This is paid to the adviser in 1/12th instalments. So, if the value was £500,000 the average ongoing fee would be £5,000, which would be collected in 12 instalments.

At Dentons Wealth, our ongoing fee is 0.75%, so the same fee would be £3,750, a saving of £1,250 per year.

For Life Insurance products, the charging methodology is different. The fees are paid in the form of commission from the Product Provider and are not paid by the client.

Equally, certain products carry a fixed charge, such as preparing and producing a Lasting Power of Attorney.

For more clarity on our charges, please refer to our Terms of Business or speak to your dedicated Adviser. Please note that other charges may apply, such as platform charges and portfolio fund management charges. This will be clearly explained to you and will only apply if the investment was to commence.

Disclaimer: Please note that this article does not constitute financial advice, and you should always consider taking professional advice before making financial decisions. Indeed, it’s important to consider seeking professional advice to explore the best options for your needs.