The Cost of Financial Advice
Financial planners can be paid in a variety of ways for their work. The amount you will be charged will depend on how complex your situation is and the level of service that the financial planner provides. By law, all advisers must disclose all forms of payment, upfront or ongoing fees and commissions. Many advisors will charge you for one or a combination of these methods. Details of fees and charges should be included in the financial planner's Financial Services Guide.
The main methods of payment are summarised as follows:
Plan preparation:
- flat dollar amount / once-off fee (depending on your individual
requirements)
Implementation - any combination of the following:
- fee for service (hourly rate)
- entry fees
- deferred entry fee
- transaction fees
- brokerage
- legal, accounting and other fees
Maintenance:
- management fees
- ongoing advice (trailing commission)
Some important things to note:
- never make a cheques for an investment payable to your adviser. Money invested should always be made out to a third party in which you are investing or put into a trust account.
- be wary of planners who seem to offer their services " free of charge" - you can be sure you will be paying for them elsewhere.
- check the fine print. You should receive three key disclosure
documents from your financial planner:
- Financial Services Guide (FSG) - document to help you evaluate
whether to obtain the services of the financial planning firm
- Statement of Advice (SOA) - outlines the advice you are
receiving
- Product Disclosure Statement (PDS) - outlines the details of the financial products you are being recommended
- Don't always go for the cheapest provider and ensure that what you invest is relative to what you pay for.
- Take extreme care with high-rates of return. Ask your financial adviser to provide a written explanation with the risks fully explained before committing.
- Cooling off periods. You generally get a 14 day 'cooling off' period if you purchase managed funds, life insurance, super or general insurance.
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