How to find the right professional financial advisor for you

In Australia, financial advisors are highly regulated by the Australian Securities and Investments Commission (ASIC) and can be expensive. New reforms are supposed to be coming to ease the cost burdens to make it easier to find a good advisor.

Time to sort your finances and get professional advice? Here’s how to find the right licensed advisor for you and make sure your finances support your unique wealth, lifestyle and health goals.

By Allison Tait

The first place most of us begin when looking for a financial advisor is to ask friends and family for recommendations. 

But don’t just settle for the first advisor you meet because a) your friends recommend them, b) they communicate well or c) you like them.

Meeting 2 or 3 advisors before you select one will show you the different processes and fee structures on offer, which means you may need to look wider than your social circles for candidates.

If your accountant suggests it’s time to chat to an advisor, they may have professional recommendations for you, or you could begin by contacting your superannuation fund – most funds have financial advisors on staff who can usually give you free or low-cost general advice

(The new Government regulations being introduced this year will open the way for super funds to be able to give more financial advice in a more affordable way, so it’s worth investigating this option, too.) 

Right now, anyone who sells you a financial or investment product or gives you financial advice must have an Australian financial services (AFS) licence. You can check ASIC’s Professional Registers here to make sure any advisor you are considering is licensed.

MoneySmart suggests that the best way to see at a glance what a financial advisor is offering is to read their Financial Services Guide (FSG), which may look like a LOT of fine print, but which will show you:

  • the services they offer
  • how they charge
  • who owns the company
  • any links to product providers
  • their AFS licence number.

You’ll find an advisor’s FSG on their website, or you can ask for a printed copy. 

What do financial advisors cost?

One of the biggest reasons Australians avoid getting professional financial advice is the cost.

In 2019, the Government had to respond  to misconduct in the Banking, Superannuation and Financial Services Industry

A raft of changes around financial advice fees, commissions and the sale of superannuation products were introduced, and changes are still being made today.

The reforms helped to protect Aussie investors from trailing commissions, duplicate fees and unqualified advice, but left the 5 million people at or approaching retirement with just 16,000 professional advisors to share between them.

Supply and demand then meant getting the financial advice you want or need can now come with a price premium.

According to Canstar, the cost of financial advice in Australia increased 40% from 2018-2021, and they attribute the price rise to tighter regulations and fewer advisors. 

Canstar reports that the cost of seeing a financial advisor is about $3500 a year on average, but comprehensive ongoing advice may cost closer to $5000 a year on average.

“In terms of ballpark to seek advice, the $5k mark would be a rule of thumb,” says David Sharpe, chair of Financial Advice Association Australia . “However, to then implement and manage [the advised financial plan] would likely be an additional cost.”

In December 2023, the Federal Government announced a new financial advice package to mitigate this cost, promising to reduce red tape and expand the supply of a new class of financial advisors to give advice on simple matters without a fee or commission. 

Legislation is being developed to introduce this model in 2024. Fingers crossed it comes soon.

For now, though, financial advisors in Australia get paid in three main ways:

A fixed fee

Fixed prices are the most common and are a set price for a particular service. These may include:

Statement of Advice (SOA) fee, which is a one-off fee for preparing your SOA. The fee is either paid upfront and deducted from investments, or added to ongoing fees for service. 

Fee to implement financial advice – another one-off fee, this time to implement financial advice, such as opening accounts and purchasing investment products. This can be an upfront fee based on the value of your assets.

Fee for ongoing financial advice – as stated on the tin, this is an ongoing fee (often monthly) for advice and services, such as reviews, phone calls, emails and newsletters. 

Read about other fixed fees for financial advice at MoneySmart.

Percentage-based fees

These can be  ‘asset based’ or ‘performance based’.

Asset-based fees (portfolio percentage) are based on the total value of the assets in your portfolio. The more assets you have, the higher the fee. This fee is paid regardless of how well your investments perform.

•An investment management fee (performance percentage) is an additional percentage fee, based on the performance of your investments – usually measured by an agreed benchmark. MoneySmart recommends asking your advisor what this fee works out in dollars to give you a clear picture of what may be charged – the percentage may seem much lower than the actual dollar amount.

Commission fees

A commission is an amount earned by an advisor for selling specific financial products, and is calculated as a percentage of what you pay for the product.

Financial advisors are banned from charging commissions on most new investment products, including superannuation. They can still receive commissions on life insurance, but this is capped.

If you’re paying a financial advisor an ongoing fee for advice, you should receive a fee disclosure statement (FDS) each year, showing the fees you’ve paid. You’ll need to opt-in to your ongoing fee for advice arrangement every year. 

If you don’t pay an ongoing fee for advice, you can still ask for an annual statement.

Make sure you check your statements carefully as they’ll show you the fee amounts, that your advisor did everything they’ve charged for, that your advisor is actively managing your portfolio and that any asset-based fee balance with the value of your portfolio.

Start your own financial education for free

If you want to do your own research on investment products and strategies, or better understand your own position before you seek out an advisor, there are free and low-cost tools around. 

Your super fund’s website will include a range of resources for retirement planning, and most also offer education sessions and easy access to financial advisors. Your first meeting with a financial planner through your super fund may also be free.

And don’t miss Citro’s Calculating Retirement Guide for an accessible overview.

Try this solid retirement planner on the government-backed MoneySmart website where you’ll also find a Superannuation Calculator and some tips on how to invest

Services Australia offers a free Financial Information Service designed to ‘inform and educate you about financial matters’. 

Their website includes a series of videos about different aspects of finance, including investing basics, retirement and aged care, as well as live webinars and Financial Information Service Officers available for personal appointments. 

Read more on Citro

Understanding superannuation and how retirement income works

Peak Pension: a sweet retirement strategy

How much it pays to put off retirement for another 5 years

11 ways to make retirement income last as long as you do

Understanding superannuation and how retirement income works

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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