As financial adviser fees continue to rise, more and more people who need financial advice to help them manage complicated rules and regulations—particularly surrounding retirement planning—are being shut out of the advice-giving process.
Adviser Ratings reports a 7% increase in financial advice fees over the past year, with a median fee of $3960 per year. This rise is attributed to a 58% increase in fees over the past five years due to a shortage of qualified financial planners. The 2023 Intergenerational Report predicts a double-digit increase in the number of people aged 65 and over.
Advisor Ratings research indicates that consumers, including those with advisers, are willing to pay $911 a year for advice. Financial planner numbers have stabilized at 15,600 in 2023, down from 28,000 in 2018.
The Albanese government has introduced legislation to reduce financial planner fees and expand access to simple financial needs. The first tranche of legislation includes measures to reduce red tape for planners and allows super fund members to pay for personal financial advice from an independent financial adviser using their super accounts.
The second tranche of proposed legislation is expected to be developed in the second half of this year, aiming to streamline and reduce costs in financial planning statements of advice. It will also introduce a new class of advisers who can provide limited personal advice. This comes amid increased costs faced by businesses, such as higher power bills.
Australian planners are not happy about the yearly charge they have to pay the Australian Securities and Investments Commission, nor about the settlement they will get for their clients who were harmed by the collapse of Dixon Advisory under the new Compensation Scheme of Last Resort, which occurred before the scheme’s establishment.
A financial planning business with 10 planners is facing a bill of $40,000 for the year, which they were not expecting. Although legislative changes are not enough to reduce costs, they hope further changes will enable them to offer simple advice at a lower cost to consumers.
Planning businesses offer various business models, some without initial meeting fees, so it’s recommended to explore options and consult at least three planners to ensure you’re comfortable with the fees you’re paying.
