Wealth Management

How much does a financial adviser cost?

Matthew Swieconek
31 January 2023
7 min read

31 January 2023

At some stage in your life you may find yourself turning to the services of a financial adviser, and when that time comes, one of the first questions that will invariably arise will be how much does a financial adviser cost? How does a financial adviser charge for their time and services, and how do you know if you’re paying too much? To assist you in answering these questions, below we will look at the typical fees that you may encounter when engaging a financial adviser and how these fees are typically charged.

Typical financial adviser fees

Firstly, it’s important to understand that there is no single charging methodology that is standard across the financial planning industry. There are, however, commonalities with the types of fees that are charged by different financial advisers and these fees are dependent upon the type of advice and services that you receive. For instance, some of the factors that may impact the advice fees payable include:

  • The type of advice you receive - Limited v Full. At the request of the client, financial advice can be either limited to a specific issue that does not take into consideration the client's full financial situation. Or it can be full, comprehensive advice that does. Within the category of full advice, there will be differing levels of complexity involved, depending upon a client’s financial affairs and requirements.

  • The nature of your advice relationship. Whether limited or full, some advice will be ‘one-off’ in nature where there is no obligation on behalf of the adviser to review your affairs on a regular basis. Alternatively, many clients opt to have an ongoing agreement with their financial adviser, with regular review meetings conducted each year to check in on the progress of the client’s overall financial plan.

Financial adviser fee structures

To begin with, your initial consultation with a financial adviser should be cost and obligation free. Beyond this, the typical fees that you may expect your financial adviser to charge are as follows:

Statement of Advice (SoA) Fee: Your SoA is the initial piece of advice produced by your adviser after they have gleaned all relevant information from you during the ‘fact finding’ process. The SoA fee will vary based on the complexity of the advice being provided to you and is typically levied as a flat-dollar fee. Your adviser will provide you with a quote for the production of your SoA prior to any work commencing.

Ongoing Advice Fee: These fees will be clearly disclosed in your SoA and cover the ongoing advisory services that your adviser will undertake throughout the year. Ongoing advice fees can take several forms:

  • Fixed-dollar fees: Some advisers will charge a fixed dollar amount for their ongoing services, based on the time spent working with you throughout the year as well as the complexity of your financial affairs. As their title suggests fixed-dollar fees remain static and do not rise or fall with investment markets.

  • Asset-based fees: With this type of structure your adviser will charge a percentage fee based on the amount of investments that you have under management with them. Unlike fixed-dollar fees, asset-based fees do rise and fall with investment markets.

  • Hybrid fees: This form of fee arrangement is a combination of fixed-dollar and asset-based fees.

Implementation Fee: Your financial adviser may also include an ‘implementation fee’ that covers the processing of all paperwork and execution of all transactions should you agree to proceed with the advice.

There are a variety of different methods available for paying advice fees. SoA fees are commonly paid via direct credit, direct debit or credit card upon receipt of an invoice, but these can also be paid from your investment portfolio.

Ongoing Advice Fees are commonly paid on a monthly basis directly from your investment portfolio, but your adviser may also be happy for you to settle fees via direct credit or direct debit from your bank account, or via credit card. Most advice businesses are flexible when it comes to your preferred method of payment so be sure to have this conversation with your adviser.

How to make sure your financial adviser fees are fair

Fee fairness is subjective, but there are a few ways to make sure you are getting the most bang for your buck and not being taken advantage of. Here are some things to consider when it comes to financial advice fees.

  1. Are the fees transparent? A financial adviser should be able to clearly explain and disclose their fees to you. Be wary of anyone who is offering services for free or being cagey about what it costs to work with them. Ask for a specific fee schedule and find out when and if costs could change.

  2. What value will the adviser bring to your affairs? Your potential adviser should be able to articulate the value they bring to your financial situation. For instance, how will their recommended strategies provide you with value over and above the fees that you will pay?

  3. Does the adviser receive fees from other sources? Some advisory businesses receive fees from investment products and platforms that allow them to offer a lower, subsidised advice fee as a result. Your adviser is obligated to ensure that these investment products align with your best interests, but it is important to be fully informed about these types of arrangements nonetheless.

Every year where an Ongoing Fee Arrangement is in place, your adviser will provide you with a fee disclosure statement that outlines the fees paid by you over the preceding twelve months, along with the services provided to you. In addition to this, they will also provide you with a fee renewal form that outlines an estimate of the fees that will be payable by you over the coming twelve months, along with a commitment of the services that will be provided for these fees.

As mentioned above, there is a great deal of subjectivity when it comes to the value of advice fees as one person’s perception of value will be very different to another. For some, the peace of mind they receive from working with an adviser is all the value they need, while for others, it is about the specific financial outcomes they achieve relative to the fees that they pay.

Are financial adviser fees tax deductible in Australia?

Generally speaking, financial advice fees are only tax deductible to the extent that they pay for investment advice that is directly associated with a specific investment that generates assessable income. The fee payable for the preparation of your Statement of Advice (SoA) is not a tax deductible expense, nor are fees for advice regarding non-assessable pension income as these fees haven’t contributed towards your taxable income.

The subject of tax deductibility of advice fees can be a complicated one, so best to speak with an adviser, or qualified Accountant who can assist you with any questions that you may have.

Key takeaways

There is no single charging mechanism that financial advisers use across the financial planning industry in Australia. That being said, there are some common ways that advisers administer fees, but the amounts that they charge for their services and advice are wide and varied.

While all fees must be disclosed to you before you can consent to any financial advice, it’s important that you ask plenty of questions so that you can make sure you are fully informed. Contact Findex today to see if we can help you with your wealth management checklist, and more.

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Author: Matthew Swieconek | Head of Investment Relations