Jeff Salway: Good financial advice is invaluable - but it still has a price on it

How much would you pay someone to put your finances on the strongest possible footing, secure your family's future, boost your chances of a comfortable retirement and even knock years off your working life?

We're talking about expert advice that keeps a roof over your head and the wolf from the door; prevents the taxman from taking more than you need to give and ensures your hard-earned money is wisely used.

Less than half of us would be prepared to pay for such advice, according to the Association of British Insurers (ABI), and one in three would pay no more than 300.

That so many people wouldn't be prepared to spend money on financial advice is, if we are being realistic, not a big surprise, particularly in a climate in which many people are cutting costs wherever they can. But it does again raise questions over the perceived value of advice.

Many of those who claim they would not pay for advice have almost certainly done so already without realising it, only indirectly. The Financial Blissful Ignorance Monitor, published by Alan Steel Asset Management last month, found that one in every two bank and building society customers do not know what charges and commissions they are paying on their pensions or investments, or believe they are paying nothing.

Yet many bank and building society customers pay commission of 7 per cent or more on lump sum investments. The perception that it is free is created by the way in which charges are built into the investments, although the impact of those costs on the eventual returns takes a bigger bite out of the individual's capital than the typical adviser fee.

One reader wrote last week to tell me about the 10,000 commission that his bank took out of his 140,000 investment, claiming he had not been warned about it upfront. He could have saved that 10,000 by going to a decent adviser.

You would expect to pay an average of 670 for full financial advice, while highly qualified chartered financial planners will charge around 800 to 2,500 for comprehensive financial planning, depending on the extent of the work needed and the financial circumstances.

Those planners tend to serve only people with at least 100,000 to invest. Below that level, many IFAs continue to rely on commission payments to help people pay for advice.

But under the retail distribution review (RDR), coming into force from the beginning of 2013, product providers such as insurance companies will no longer be able to pay commission to advisers for selling their products, in a wise move aimed at eradicating bias and mis- selling.

However the ABI's figures underline the fact that when advice can no longer be paid for by commission, fewer people will seek financial advice. Yes, some fees will still be met from the investment, even under the new rules.

But the reality is that from 2013, more people will go to the high street for financial advice (even though more banks are likely to follow Barclays in withdrawing from the advice market).

Those people will get sub-standard, even irresponsible advice and effectively pay more for it, but the perception that they would have to dig deep to pay for an IFA or financial planner still deters them from seeking better advice.

In my experience few IFAs understand why, regardless of how valuable people may believe the good advice to be, the lump sum costs are an issue. Their argument is that if you think it's worth it, you will pay well for it. But we don't necessarily think like that. Yes, people are used to paying upfront for solicitors, but more often than not that is during transactions where there's no alternative but to spend money on legal advice. For every well qualified adviser who knows wealthy people will continue to pay good money for expertise, there's an IFA bemoaning the death of commission and looking for the exit door (as Gareth Howlett explains elsewhere on this page).

The loser, however, is the average or middle-income earner who in future will, rightly or wrongly, think twice about financial advice because of their reluctance to hand over a lump sum when there may be more pressing financial needs.

I believe most people recognise that good advice can be valuable, particularly when it is promoted well; figures suggesting they are not prepared to pay don't tell the whole story. More IFAs need to realise that before they abandon the middle ground.