Financial advice costs

Paying for financial advice

ASIC receives complaints about the fees charged by financial advisers. It's important to understand exactly how your adviser will be paid before you engage them, and again before you agree to any of their recommendations.

Here we outline some of the fees for seeing a financial adviser as well as your payment options.

The first meeting with a financial adviser

The first meeting with an adviser is usually free. During this meeting, you and the adviser can discuss your advice needs and the adviser can give you an idea of what they can do to help you.

The adviser will also be able to tell you how much the advice will cost so you can decide whether to proceed any further. Make sure the cost is given to you in dollars, not just as a percentage of the amount you have to invest.

Statement of advice fee

If you decide to continue with the adviser, they will prepare a statement of advice (SOA) that will formally document the advice, the strategies and any financial products they recommend. The cost for preparing the SOA will be billed to you or may be deducted, with your permission, from the balance of your investment.

Smart tip

Did you know financial advice fees are negotiable? Consider negotiating with the adviser about the amount you'll pay for the advice.

The cost of the advice will depend on its scope. As a guide, expect to pay between $200 and $700 for simple advice and between $2000 and $4000 for more comprehensive advice. If you've agreed to ongoing advice, some of the cost may be paid over time.

If you receive advice about insurance, you may not have to pay for the SOA. This is because the adviser will be paid commissions from the insurance company.

Even if you decide not to proceed with the adviser's recommendations, you will generally be expected to pay for the preparation of the SOA.

Fee for implementing financial advice

If you decide to accept the adviser's recommendations there may be a fee for implementing the advice. This pays for administration work. You may be able to negotiate the rate with your adviser.

There are usually different payment options. You can agree to pay upfront or the cost can be deducted from the investment.

Ongoing fees for financial advice

If you've agreed to pay a fee for ongoing advice, it's important to understand what your fee will cover. Services may include:

  • Newsletters
  • Regular reports on your investment portfolio
  • Regular reviews with your financial adviser
  • Invitations to seminars.

Bronze, silver, gold or platinum services

Many advice businesses have 'bronze', 'silver', 'gold' or 'platinum' services you can choose from, with fees scaled according to the services you receive or the amount of contact you can have with your adviser.

Implementation fees 

Advisers can charge another implementation fee in addition to your ongoing advice fee if you want to change your financial plan following a review.

Annual fee disclosure statements

If you've agreed to ongoing advice, you will receive an annual fee disclosure statement that will outline the fees you paid, the services you received, and the services you were entitled to receive for the previous 12 months.

Carefully consider the information in your fee disclosure statement:

  • Have you benefited from the services you paid for?
  • Were they worth the cost?
  • Are you happy to pay the ongoing advice fee for another 12 months?

You can end your ongoing relationship with your adviser at any time. See working with a financial adviser  for more information.

See questions to ask a financial adviser for talking points you can use to check the cost of ongoing advice.

Important

Never write cheques payable to your adviser if the money will be used for investments. Make the cheque payable to the product provider instead.

Commissions and fees for financial advice

Commissions and volume-based payments for recommending financial products can influence the advice given by financial advisers.

Commissions were banned on new investments and super products from 1 July 2013. Some other commissions, for example, for selling life insurance, remain.

However, if you bought a financial product before 1 July 2013 the adviser may continue to receive a commission each year for advising on that product. The commissions will continue to be deducted from the money you have invested until you leave that product or end your relationship with that adviser.

Information about commissions may not be included in your fee disclosure statement.

Smart tip

You are likely to be charged a fee for every investment product you buy. Find out about all the fees, add them up and see if the investment still appeals to you.

Find out about the fees you're paying 

If you're unsure about the fees you're paying, talk to your adviser. Ask them to explain the products you have bought and whether there are commissions involved.

If commissions are being deducted from your investments and you're not happy with this arrangement, speak to your adviser about your options. You may be able to switch to a product that doesn't involve commissions, or arrange for the commissions to be rebated to you.

Remember, any fee you pay is less money you have to invest.

Complaining about fees

If you're not happy with the adviser's response (or they refuse to speak to you) you should make a complaint using the adviser's complaints process.

See problems with a financial adviser for more information about what to do if you're unhappy with the service you've received from an adviser.

See questions to ask a financial adviser for talking points you can use to check how much you'll pay for advice.

Case study: Edward asks to see all the fees

Older Guy With PapersEdward goes to see a financial adviser.

The adviser takes the time to understand what Edward wants to acheive and offers to put together a financial plan for $1,500 and implement the advice for a further $1,500. The adviser also tells Edward that there may be other fees for the products that have been recommended. Edward agrees to pay for the financial plan.

At the next meeting, Edward receives the plan which also outlines the additional fees for implementing the advice. The fees include:

  • $1,000 a year payable to the adviser for reviewing Edward's investments
  • $1,500 a year for access to the investment platform
  • $1,500 a year payable to the investment managers for managing Edward's investment
  • a further $1,000 a year for an income protection policy that Edward requested.

Edward asks the adviser for more information about the total amount he is payng in fees, and who's receiving each fee. The adviser tells Edward he can find this information in a table at the back of the SOA that summarises all the fees and charges relating to the first year of advice.

Edwards fees
Fees payable by Edward Fees paid by Edward Fees charged by % per annum Fees received by
Financial planner Investment platform Product issuers
Upfront fees
Financial plan fee $1,500 - $1,500 - -
Implementation fee $1,500 - $1,500  - -
Ongoing fees on $200,000 Investment
Ongoing advice fees $1,000 0.50% $1,000 - -
Platform administration fees $1,500 0.75%   $1,500  
Investment management fees $1,500 0.75% - - $1,500
Total ongoing management fees $4,000 2.00% - - -
Insurance premiums
Insurance premiums year 1 (100% commission to adviser) $1,000 - $1,000 - -
Total fees in Year 1 $8,000 - $5,000 $1,500 $1,500

Edward now understands that the total fees for the first year are $8,000.

Of course an adviser must be remunerated for their services, however, it's in your best interest to know how much and how often you will pay for the advice you receive.


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Last updated: 31 May 2016