Advice

7.28.2023

Is It Worth Paying for a Financial Advisor? (Australia Guide)

James O'Reilly
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Table of Contents

Is it worth paying for a financial advisor? We break down all financial advisor costs and how these services will help you you reach your financial goals.

Exploring the intricate realm of personal finance can feel overwhelming. Questions about investments, retirement planning, and managing debt often arise, leaving many Australians uncertain about the best financial path to take.

In our detailed guide about financial planners, we demystify the realm of financial advisory services. We examine the pros and cons of engaging a financial advisor in the Australian context, delving into practical situations and expert opinions.

Read on to catch valuable insights to make an educated choice regarding your financial future and the prospect of partnering with a professional advisor.

So, let's demystify the world of financial advice together.

How Much Does a Financial Advisor Cost in Australia?

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So how much does it usually cost to work with financial advisors in Australia? The fees financial advisors in Australia charge will depend on your financial situation and the services you need, so it's crucial to discuss this with an advisor before you get started.

The average fee for financial advice in Australia is around $3,500pa, although we note that this is a mean figure which is 'dragged down' by smaller account balances and basic advice needs. In our experience, comprehensive financial advice tends to range between $5,000pa and $8,000pa, with costs increasing as complexity rises.

To learn more about these fees, the Financial Planning Association offers valuable insights and resources about fee structures and industry standards. Visit the FPA website to learn more about what recognised financial professionals charge.

Recommended Read: What Is The Difference Between A Financial Planner & Advisor?

What Factors Affect Overall Financial Advisor Costs?

Understanding the factors that influence financial advisor costs is essential for anyone seeking professional financial guidance.

Various elements shape the overall expenses involved in securing a financial advisor's services. Here's a look at some of the most important factors.

Type of Financial Advice

Basic services like a one-time consultation are cheaper. The cost of a financial advisor depends on the type of advice you need. Comprehensive financial planning advice, covering areas like investment, retirement planning and tax minimisation, is likely to have high complexity and will cost more than advice which relates only to your insurance needs. Specialised services tailored to specific needs also vary in price based on their depth and expertise.

The Value of the Advice

Not all advice is the same. Some advisors provide generic 'one size fits all' advice, while other financial advisors will give a personalised and holistic plan that greatly influences your financial well-being. The latter may have a higher initial expense, but is likely to lead to an improved financial position in the future.

Valuable advice brings assurance, aids in goal achievement, and guarantees efficient management of your investments. When evaluating the value of the advice received, it's crucial to consider its long-term advantages.

The expertise of your advisor

The professional financial advice of your financial advisor significantly impacts costs. As with any professional, highly experienced advisors are likely to charge higher advice fees due to their extensive knowledge and successful track record.

This additional investment can be valuable, provided your advice reflects their expertise. An advisor may have 30 years experience, but if they have spent their entire career providing 'cookie cutter' advice you're not likely to get much value from the higher advice fees paid.

Take care to ensure that your advisor's expertise often results in more strategic financial planning, with an eye on your broader financial position, maximising returns and minimising risks. While their services may come at a premium, their valuable insights and tailored solutions can make a significant difference in your financial outcomes, justifying the ongoing fee and the investment in their expertise.

How Do Financial Advisors Charge Fees?

The most common methodologies advisors apply when charging fees are flat fees, hourly rates, commissions or percentage-based fees based on your managed assets:

Flat Fees

Flat fees, or 'project fees', vary widely depending on the service being completed. A reputable advisor operating on a 'flat fee' model will seek your approval on the work they intend to do and the specific fees associated before commencing. The pros of this approach are that you know what to expect in terms of the final bill, and you're clear on the scope of work. The main con is that a flat or project fee will often include an additional component to provision for any challenges encountered in delivery.

If your advisor is proposing a flat fee structure, it's important to understand when your fees are payable. Below is an outline of some common flat fee examples and when they are typically paid:

  • Statement of Advice (SOA) fee — A single charge for crafting your SOA. You can pay this upfront, deduct it from your investments, or add to ongoing service fees.
  • Fee to implement financial advice — A one-time charge for carrying out financial advice, such as bank account setup and investment purchase. It may be upfront, based on your asset value.
  • Fee for ongoing financial advice — A recurring fee covering services like reviews, reports, calls, emails, and newsletters, often paid monthly
  • Review fee — A one-time charge for revising your financial plan, making necessary changes, and aligning your investments with goals, for instance.
  • Investment platform fee — Fixed charge for the administrative financial platform handling your investments.
  • Hourly rate — Set fee per hour for addressing specific questions outside regular advice or services.
  • Service fee — A fixed charge for a particular service or professional advice type, like preparing your Statement of Advice (SOA).

Hourly Rates

Hourly rates are less common in financial advice, however, they are seen in Australia. Hourly rates for an experienced financial advisor typically range from $275 to $550 per hour, depending on their background and areas of expertise. Under this method, you may benefit from small projects that only require an hour or two, however the final bill for larger projects can be very expensive and especially if there are delays in either the production or implementation of your advice.

Commissions

Commissions are received by most financial advisors in Australia, for instance, if a personal insurance contract is established on your behalf. In this case, it is the insurer that pays the financial advisor directly, which can result in lower and sometimes nil additional payments for the client. Pleasingly, recent legislation has banned a number of more 'conflicting' commission payments, which may result in consumers receiving advice which is not in their best interests.

Asset-based Fees

Asset-based fees are typically charged on the total investments managed by an advisor, generally sitting between 0.5% to 1% of your balance. The 'pro' of this approach is that your advisor is motivated to grow your account balance, as this means that their advice fee will be commensurately higher. The major 'con' is that as your balance grows, these financial advice fees can cease to accurately reflect the work an advisor is doing on your portfolio and result in you overpaying versus a different fee model.

We note that asset-based fees can be a percentage of portfolio or based on performance:

  • Asset-based (portfolio percentage) — A percentage fee calculated from your total portfolio value. The fee increases with more assets, payable regardless of investment performance.
  • Investment management fee (performance percentage) — Additional percentage fee, based on the performance of your investments (usually measured by an ongoing agreement with the benchmark).

Clients must understand the implementation fee structure thoroughly before engaging with a financial advisor to ensure transparency and avoid surprises.

What to Look For to Get Your Money's Worth

What to Look For to Get Your Money's Worth

You'll want to look for into these things first before hiring a financial advisor:

1. Are they evaluating your financial needs?

A great advisor starts by delving into your financial dreams and challenges, pinpointing your short-term and long-term goals, and ensuring you have a clear vision of your financial path. This means that achieving your individual goals should feel like a top priority from your very first meeting with an advisor. At Northeast, our advisers specialise in understanding your goals and then crafting strategies tailored to your unique aspirations.

2. Check their social proof.

The real-life stories, google reviews, and feedback from clients should offer insight as to what you can expect, the type of client the advisor works with, and how they are likely to help. A clients' satisfaction stands as a testament to an advisor's unwavering dedication to excellence and client success.

3. Learn what a financial advisor does.

A financial advisor is more than a number cruncher; they become your trusted financial ally or financial counselor. Learn about the holistic services they offer, from investment management fees and planning to retirement strategies. Good advisers excel in every facet of money management and ensure a comprehensive approach to your financial situation.

4. Choose a financial advisor who teaches you.

Best-in-class advisors not only handle your finances but also educate and mentor you. We are committed to enriching our members with financial wisdom with a mantra of developing 'resourcefulness over reliance'. At Northeast Wealth, our advisers ensure you understand every decision because we want our members to be an active participant in their own financial affairs.

5. Research financial advisors.

Financial advisers vary in expertise. Investigate their qualifications, experience, and track record. Our team comprises seasoned professionals devoted to your financial prosperity. We stand out through our unwavering commitment to transparency and integrity, setting us apart in the financial services landscape.

How to Maximise Financial Advisor's Fees

Even when working with us, we always recommend that our clients do these things to make the most out of any arrangement with a financial advisor.

1. Do your research.

Before diving into the world of financial advising, arm yourself with knowledge. Research potential advisors thoroughly. Investigate their credentials, client testimonials, and areas of expertise. We encourage our clients to be well-informed. Understanding your advisor's background and approach is the first step toward a successful ongoing relationship.

2. Take a look at how your advisor is paid.

One critical aspect often overlooked is how your advisor is compensated. Different advisors have various fee structures, from hourly rates to commission-based models. Understanding these intricacies is essential. We believe in transparent communication. We explain our fee structures clearly, ensuring you have a complete understanding before proceeding.

3. Discuss your goals and financial standing with your advisor. 

Communication is key to a fruitful advisor-client relationship. Be open about your financial goals, aspirations, and current standing. Your advisor needs a comprehensive picture of your situation to tailor their strategies effectively. Our advisors engage in in-depth discussions, ensuring we comprehend your objectives entirely. This dialogue forms the foundation for a personalised financial roadmap.

4. Hire a new advisor. 

Sometimes, despite efforts to make things work, a financial advisor might not align perfectly with your needs. Don't hesitate to explore new avenues. Finding the right advisor is crucial for your financial strategy and wealth management. We boast a team of dedicated professionals ready to assist you. If you're contemplating a change, reach out. We're here to guide you toward a secure and prosperous financial future.

Is A Financial Advisor Worth It?

A financial advisor can be incredibly worthwhile if you find the right one. Their knowledge can navigate intricate financial choices, aiding in wise investments, retirement planning, tax reduction, and goal achievement. Tailored and ongoing advice can save money and offer reassurance, which is vital in uncertain economic times.

However, it's crucial to choose an advisor in harmony with your objectives. We advocate for personalised financial guidance, empowering you to move forward in your financial endeavors with assurance.

If you're looking for a financial advisor who will provide top-level advice that's tailored to your needs and goals, we at Northeast Wealth are always ready to deliver. Work with us, and we'll ensure that you're getting your money's worth. Our goal is always to help our clients maximise their investment, whether it's on financial instruments or sound strategies and advice.

Feel free to get in touch with us today.

Frequently Asked Questions (FAQs)

What Services Do Financial Advisors Provide?

A financial advisor or financial planner offers various services, including personal financial advice, investment advice, retirement planning, estate planning, investment strategy, investment portfolio management, and insurance guidance.

How Do Advisors Charge for Their Services?

Financial advisors typically impose hourly charges, flat fees, monthly retainers, or a percentage of the assets they oversee. The landscape of financial advisor fees offers various options and structures. Some might also earn commissions from any financial product they recommend.

Are Financial Advisors Regulated in Australia?

Yes, Financial advisors in Australia are overseen by the Australian Securities and Investments Commission (ASIC) and must follow the ethical standards outlined by the Financial Adviser Standards and Ethics Authority (FASEA). These regulations ensure advisors maintain high ethical standards and provide reliable financial guidance.

How Can a Financial Advisor Help with Tax Planning?

Advisors can optimise your investments to minimise taxable income. They also assist in understanding the tax implications of various decisions, from ordinary investments to complex financial investments.

Can Financial Advisors Help with Debt Management?

Yes, advisors can offer strategies to manage and reduce debt effectively, creating a financial plan tailored to achieve financial stability. If you need additional support or seek advice, organisations like the National Debt Helpline can also provide valuable resources, comprehensive advice, and assistance in managing your financial challenges.

How Does a Financial Advisor Stay Updated with Financial Regulations?

A qualified financial advisor attends regular training sessions, seminars on financial counseling ongoing advice, and workshops to stay updated with changing financial regulations, purchasing investments, and market trends.

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