How much does a financial adviser cost?

Whether you’re looking to achieve goals like home ownership or you want to set yourself up for retirement, a financial adviser could help you create a plan to get there. But how much would it cost you?

The cost of financial advice in Australia has skyrocketed in recent years. Fees have increased 40% over the past three years to December 2021, according to a recent report by Adviser Ratings.

The Adviser Ratings 2022 Financial Advice Landscape Report attributed the price rise to increases in the cost of providing advice due to tighter regulation, as well as a high number of people leaving the industry.

How much does a financial adviser cost?

The cost of seeing a financial adviser is, on average, about $3,500 a year, according to Adviser Ratings. This figure includes the cost of both limited advice and comprehensive ongoing advice. For comprehensive ongoing advice only, the cost is closer to about $5,000 a year on average.

Financial advice fees can vary depending on factors such as:

• the type of advice you want
• the complexity of your financial situation and
• the fee method the adviser uses.

How do financial advisers charge fees?

There are two main fee methods: fixed fees and percentage-based fees.

Fixed fees

Financial advisers most commonly charge fixed fees. This involves charging a set price for a particular service. For example, a fixed fee to:

• prepare a statement of advice
• implement financial advice
• give ongoing financial advice.

“Some will charge depending on your situation and what areas of advice you want to engage them on,” Sarah Abood, CEO of the Financial Planning Association of Australia (FPA), told Canstar.

“Some are comprehensive financial planners so they will do an overall plan for you upfront and then implement it a bit at a time.”

Some advisers may charge a fixed fee per hour, although this is not as common.

Percentage-based fees

The other type of fee structure is percentage-based fees. This includes:

• asset-based fees based on a percentage of the total value of assets in your portfolio. For example, this could be an annual fee of 1% of your assets.
• investment management fees based on the performance of your investments. According to ASIC’s Moneysmart, it is usually measured by an agreed benchmark.

Commissions

Financial advisers are banned from charging commissions on most new investment products (including superannuation and ordinary investments). Advisers can still receive commissions on life insurance, but it is capped at 60% of the premium upfront in the first year of the policy, and 20% ongoing each year after that.

When it comes to price, Ms Abood says there’s nothing wrong with shopping around and meeting with a few different planners.

“Most planners will do a free first interview because they too want to know that the rapport is there and that it is the right fit,” she said.

“You’ve got to really feel comfortable with someone who is your financial planner because you obviously tell them a lot of pretty sensitive information.”

Are financial planning fees tax-deductible in Australia?

You can generally claim a tax deduction on fees paid for investment advice. However, this is provided the costs are related to advice which leads to or is directly associated with a specific investment which produces assessable income (e.g. dividends from an investment).

The Australian Taxation Office has indicated that the following fees are not tax-deductible:

• general financial advice
• preparing a financial plan
• initial investment advice
• upfront fees
• accumulated superannuation (the ongoing fee is not tax-deductible if the advice relates to the client and not the super fund)
• advice regarding non-assessable pension income.

How can I find a financial adviser?

A good starting point can be to speak to friends and family who have seen a financial adviser and hear about their experiences.

You can also search for a financial adviser through professional organisations such as the FPA, the Profession of Independent Financial Advisers (if you are looking for an adviser who has been classified as independent) and the Association of Financial Advisers.

It’s important to check that any adviser you’re considering is registered with ASIC and has a current licence, as well as the appropriate qualifications.

How else can I get financial advice?

If seeing a professional financial adviser is not affordable for you at the moment, here are some other options to consider.

Your super fund

Super funds can offer a cost-effective way to get advice from a qualified professional. Most of the large super funds have some kind of advice offering, Ms Abood said.

“Advice will be limited to your super and to matters that relate to your retirement,” Ms Abood said. “But that said, it can still cover some good ground for people and give a good starting point.”

If you get simple advice relating to your super account, it may be covered by the fees you already pay to the fund. If you get more comprehensive advice, there may be a separate fee. You may be able to pay for this directly out of your own pocket or pay for it through your investments or super.

Robo-advisers

Robo-advisers offer automated advice, typically regarding investments. You usually take an online assessment to determine your risk appetite and based on this you will be recommended an investment strategy. While this is cheaper than seeing a financial adviser, there can be limitations.

“You might get one that helps you buy stocks or rebalances an ETF portfolio and that is good as far as it goes,” Ms Abood said.

“But it is difficult to find a robo-adviser that can give you holistic advice where you can put in all your information and get the best advice for your situation.”

If you need help managing your money in general, there are also a number of budgeting tools that can connect to your bank account and help you classify your spending.

Take care with finfluencers

In recent years, investing and finance influencers (called ‘finfluencers’) have grown in popularity. A recent ASIC survey found that 33% of 18- to 21-year-olds follow at least one finfluencer on social media and a further 64% reported changing their financial behaviour as a result of following their content.

Ms Abood said finfluencers could be helpful for general financial literacy, but there are risks, particularly when they promote unregulated products like cryptocurrency.

Most finfluencers are not licensed to give financial advice. That means there are no protections if you follow their advice and something goes wrong, Ms Abood warned.

You can look up the financial advisers register to see whether someone is qualified to give advice.

Financial counselling

Lastly, if you are in financial difficulty, you may want to speak to a financial counsellor rather than a planner. Financial counsellors are professionals in counselling and debt crisis management and offer free, confidential and independent advice. You can speak to a financial counsellor by calling the National Debt Helpline on 1800 007 007.

Thanks for visiting Canstar, Australia’s biggest financial comparison site*