What is the total cost of advice?
The total cost of advice, sometimes called total cost of ownership, is everything you pay each year for advised investing: the adviser charge, the platform fee and the fund charges added together.
The FCA’s 2020 evaluation put the average all-in cost at about 1.9% a year: 0.8% for ongoing advice plus 1.1% for platform and funds.
A worked example
Illustrative charges on a £250,000 portfolio, chosen to show the arithmetic rather than to describe any firm:
| Layer | Rate a year | Pounds a year |
|---|---|---|
| Ongoing adviser charge | 0.75% | £1,875 |
| Platform fee | 0.25% | £625 |
| Fund charges (OCF) | 0.40% | £1,000 |
| Total | 1.40% | £3,500 |
The same rates on £500,000 come to £7,000 a year. A fixed-pound charge in any layer changes the arithmetic, which is why the total in pounds is the figure to compare.
The figure a firm must give you
Before it provides a service, a firm must give you "a reasonable estimate of all costs and charges", aggregated and shown "both as a cash amount and as a percentage", with an illustration of their cumulative effect on your return (COBS 6.1ZA). If you have an ongoing service, you then receive an annual statement of what you actually paid: see costs and charges statement.
Using it to compare
Two quotes with different adviser charges can come out the same once platform and fund costs are included, and the reverse. Ask each firm for its all-in figure in pounds on your amount, then compare that alongside what each service includes. Our advice fee benchmark page turns a percentage quote into pounds.
Related definitions
Sources
- FCA, Evaluation of the impact of the RDR and FAMR (December 2020)
- FCA Handbook, COBS 6.1ZA — Information about the firm and costs and charges
General information only, not regulated financial advice or a personal recommendation. FinancialAdvisor.co.uk is not authorised or regulated by the Financial Conduct Authority. Figures are labelled with their source and date; they describe the market, not any firm, and are not quotes. Spotted an error? Report it and we will correct it.