Are you getting the financial advice you paid for?

Ongoing financial advice fees - are they worth it?

Ongoing financial advice can cost thousands of dollars per year but how do know you are getting what you pay for? Here we explain the types of ongoing advice services your adviser can provide and how to check you are getting the right level of service.

What is an ongoing financial advice fee?

An ongoing advice fee is an amount you pay your adviser or their licensee to receive ongoing advice services for a period of more than 12 months. Services can include an update of your financial advice and a Statement of Advice (SOA) or Record of Advice (ROA) each year, or other services such as reports on your investment portfolio, newsletters, invitations to seminars and access to a financial adviser. 

Ongoing services packages vary so make sure you know what you are paying for. Some ongoing advice packages require the adviser to provide you with a review of your financial situation and advice each year, while other advisers may consider that trying to contact you to offer an annual review fulfills their obligation to you.

How much will ongoing financial advice cost?

Fees can be charged as a set amount, for example $1,000 or $2,000 a year or they could be charged as a percentage of your investments, which, depending on your investment balance, might be a much higher amount. For example, if you have $500,000 in investments and are paying an annual fee of 1%, this will be about $5,000 a year.

Some ongoing advice services are worth more than others. Make sure you understand exactly what you are paying for. Your ongoing service agreement is a legal contract that should set out what you will or will not receive for the fees you are paying.

Many financial advisers rely heavily on regular ongoing advice fees from customers, usually by automatic deductions from financial products.

Why ASIC is concerned about ongoing financial advice fees

An ASIC investigation into the advice practices of Australia's biggest banks and financial institutions found that over 330,000 customers may have paid more than $200 million for ongoing financial advice that they didn't receive. This figure is based on the banks' own estimates.

Common reasons banks and licensees gave for not providing an annual review included:

  • The customer did not have an adviser allocated to them
  • The adviser was not successful in contacting the customer
  • The adviser did not attempt to contact the customer
  • The customer declined the offer of an annual review.

Read more about ASIC's concerns about fees for ongoing advice and compensation paid to customers in ASIC's media release.

How to check you are getting the right level of service

Your ongoing service agreement may include newsletters or other financial education, but the most important thing it should include is an annual advice review.

Your annual advice review should include discussions with your adviser about:

  • any changes to your income, expenses, assets or liabilities
  • changes to personal insurance cover and whether your current cover is still appropriate
  • how you are tracking against stated goals
  • changes to your goals or personal circumstances
  • how changes to legislation, the economy, or financial products could affect your financial plan going forward
  • whether any adjustments need to be made to your financial plan.

Following your annual review you should receive a new SOA or ROA detailing any changes to your circumstances or your financial plan.

Check your fee disclosure statement

If you are paying ongoing advice fees, for a period of more than 12 months, you must receive an annual fee disclosure statement. This requirement has been in place since July 2013 but may not apply to advice agreements made before this date. The statement must contain information from the previous 12-month period about:

Smart tip

Check your investment transactions to see if advice fees are being deducted. These are different from investment management and admin fees.

  • the amount you paid in fees
  • the services you received
  • the services you were entitled to receive.

If there are fees being deducted from your investments and you're not sure what they are for, ask your adviser to explain them to you.

Ask for a commission rebate

In addition to receiving fees for ongoing advice, advisers may receive ongoing commissions, also known as trailing commissions, from insurance, loans, or investment products you have had for a long time. Commissions do not need to be shown on your annual fee disclosure statement, but some advice firms voluntarily include them.

Commissions can indirectly increase the cost of insurance premiums and other products. Advisers generally have no obligation to provide you with any service as a result of collecting commissions.

If you have a good relationship with your adviser they should be willing to tell you how much they receive in ongoing commissions. If you are paying ongoing commissions, ask your adviser to rebate them back to you. You can check your statements to make sure you receive the rebated commissions, or that your insurance premiums have been reduced.

Renewing your ongoing advice arrangement

As well as an annual fee disclosure statement, you must also be provided with a renewal notice for the ongoing fee arrangement every 2 years.

The renewal notice must include a statement that:

  • you may renew the arrangement by giving the current fee recipient notice in writing
  • the arrangement will terminate, and no further advice will be provided or fees charged, if you don't renew the arrangement
  • if you don't renew the arrangement before the end of the renewal period, it will be assumed that you have chosen not to renew the arrangement
  • the renewal period is 30 days beginning on the day the renewal notice and fee disclosure statement was given to you.

This means that if you receive a renewal notice and you do nothing, your adviser must assume that you do not want to receive ongoing advice and must stop charging you ongoing advice fees.

Tell your financial adviser if you move

Make sure your adviser has your current address and contact details so that you receive notification of advice reviews, your annual fee disclosure statement and an opt-in notice every 2 years.

If your adviser cannot contact you, it may mean they continue to collect ongoing fees from your investments, in the short-term, without providing you with ongoing services. Moving home may also be a trigger for your adviser to review your advice.

Getting compensation for ongoing financial advice you have not received

A lot of financial advice clients have paid ongoing advice fees without receiving an annual advice review. If this applies to you, you may be eligible for compensation. Contact your advice licensee and request a review of the fees you have paid.

If you are currently paying an ongoing advice fee but haven't received an annual review, contact your adviser or advice licensee. They should offer to provide you with a review or refund the fees you have paid. If you are not happy with their response you can make a complaint through their internal dispute resolution (IDR) scheme.

Find out more about how to make a complaint about your adviser.

How to cancel ongoing financial advice

Reviewing your financial plan at least once a year is a great way to keep your financial goals on track. You can pay a financial planner for an annual review service if you are not confident reviewing your own financial plan, but make sure you are receiving the services you pay for.

You don't have to wait for an opt-in statement to end an ongoing fee arrangement; you can notify your adviser in writing any time you wish to opt-out of their ongoing advice service. Make sure you give your adviser a reasonable amount of time to action your request and keep a copy for your records.

If you receive an opt-in statement you can:

  • return it, noting your preference to opt-out, or
  • ignore it, in which case your adviser must stop collecting fees 60 days after you were given the opt-in notice.

If you've received financial advice and signed up for an advice review service, make sure you get what you've paid for. If the service isn't provided, insist on a review or request a refund.

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Last updated: 09 Apr 2018