A £6,000 fee is either a bargain or a rip-off. It depends on one number.

Quote the same fee to two different people and it can be the cheapest advice one of them will ever buy, and roughly double what the other ought to be paying.

Same fee. Same work. Same firm.

The difference is a number almost nobody works out before they start having fee conversations, and it is worth ten minutes of your time.

The arithmetic nobody shows you

Around 70 per cent of UK advisers charge a percentage of the money you invest. It is the industry default. Say one per cent a year.

On a £1 million portfolio, one per cent is £10,000 a year. A fixed fee of £6,000 looks like an obvious win. Over twenty years that is £200,000 against £120,000, and the gap keeps widening as the portfolio grows.

Now run the same comparison on £300,000.

One per cent is £3,000. That same £6,000 fixed fee now costs you twice as much. Every year. For as long as you stay.

Somewhere between those two portfolios is a crossover point. Below it, percentage charging is usually cheaper. Above it, fixed fees usually are. Where exactly it sits depends on the firms you are comparing, which is precisely why nobody can tell you in the abstract.

We should be straight about the interest here. We charge fixed fees. That paragraph about £300,000 does not flatter us, and some readers will take it as a reason to look elsewhere. For those people that is the right conclusion.

Why the percentage model persists, fairly

It would be easy to write the percentage model off. It deserves better than that.

The fee scales down as well as up. When markets fall, the adviser earns less at exactly the moment the client feels poorest. It is deducted from the investments rather than invoiced, which keeps advice reachable for people who could not write a four-figure cheque in January. And a client with £200,000 pays a tenth of what a £2 million client pays for broadly the same process, which is part of how smaller clients get advised at all.

Whether that cross-subsidy feels fair depends almost entirely on which side of it you are sitting.

The fee you are quoted is not the fee you pay

There is a second problem, and it is bigger than the first.

The advice fee is one of five layers. There is the platform that holds your money, typically 0.10 to 0.45 per cent. The investment management, 0.20 to 0.50. The funds themselves, anywhere from 0.07 per cent for passive to over one per cent for active. And the transaction costs inside those funds.

Add them together and most people investing through an adviser are paying between 1.2 and 2.5 per cent a year, all in. On £500,000 over twenty years, the difference between the bottom and the top of that range runs into hundreds of thousands of pounds.

Most fee conversations only ever cover the first layer. My colleague has written about the four organisations working behind a single firm name, which is the other half of this picture.

What to actually ask

Two questions, and they take about thirty seconds each.

What will I pay in total, in pounds, in year one and every year after? Not percentages. Pounds. Covering all five layers. Any firm can produce this and the FCA requires them to.

Show me that same total on a portfolio half this size, and one twice it. This is the one that does the work. It shows you how the charging model behaves as your wealth changes, and whether you happen to be sitting on the favourable side of it.

If you want to see how the arithmetic plays out at your own numbers, our fee calculator will do it, and our own fees are published rather than quoted on request.

The point is not cheapness

None of this means the lowest number wins. A fee that looks expensive next to a plan that genuinely improves your decisions over thirty years is not expensive. The mistake is judging the fee on its own, against nothing.

But you cannot judge value against cost until you actually know the cost. And most people do not, because they were never shown it in a form they could compare.

Ask for both models, in pounds, at your own numbers. Then decide.

The charging models, the five layers and the worked comparison at different portfolio sizes are covered properly in our buyer’s guide. Read the full chapter →

The whole guide is also available as a 40-page PDF, free and ungated.