Consumers locked out of financial advice as fees keep rising

An increasing number of people seeking financial advice to help them navigate complex rules and regulations, particularly around retirement planning, are being locked out of advice as financial adviser fees continue to climb.

Financial Advice Association Australia CEO Sarah Abood says financial planners face costs that are too high, but is hopeful that legislative changes to come will make it possible to provide simple advice at a lower price.Credit: Dominic Lorrimer

Figures from Adviser Ratings, which rates financial advisers, shows financial advice fees increased by about 7 per cent over the past year, with a median fee of $3960 a year. Over the past five years, fees have risen by 58 per cent, amid a continuing shortage of suitably qualified financial planners.

This comes at a time when more people are seeking financial advice. The 2023 Intergenerational Report said the number of people aged 65 years and over is expected to double in the next 40 years.

Research by Adviser Ratings shows consumers, including those with an adviser, say, on average, they are willing to pay $911 a year for advice.

Financial planner numbers appear to have stabilised at slightly more than 15,600 in 2023, after falling from their peak of almost 28,000 in 2018.

The Albanese government recently implemented its first tranche of legislation designed to help bring financial planner fees down and to expand access, particularly to those whose needs are relatively straightforward.

The first tranche of legislation included measures to cut red tape for planners. Another measure clarifies that super funds members can use their super accounts to pay for personal financial advice about their superannuation from an independent financial adviser.

The second tranche of proposed legislation will be developed over the second half of this year. It is likely to include measures that allow statements of advice to be streamlined and less costly. It will also likely introduce a new class of adviser who can give limited personal advice.

Sarah Abood, chief executive of the Financial Advice Association Australia, says financial planning businesses face costs they did not foresee, in addition to the higher costs faced by all businesses, such as higher power bills.

She says planners are unhappy with the size of the annual levy they pay to the Australian Securities and Investments Commission.

Abood says planners are also unhappy they will be footing the bill for the compensation of victims of the failed Dixon Advisory under the new Compensation Scheme of Last Resort – for a matter that occurred well before the scheme came into being.

She says a financial planning business with 10 planners faces a bill of about $40,000 for the year, made up of these two costs combined, that they were not expecting.

The changes to legislation are not enough on their own to get costs down, Abood says. However, she is hopeful further legislative changes will make it possible to provide simple advice at a lower cost to consumers.

“Planning businesses have different business models and some do not charge for an initial meeting and there is plenty of choice out there”, so shop around, she says.

“See at least three planners and make sure you are comfortable with [the fees] you are paying,” she says.

• 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 financial decisions.

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