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How much should a financial adviser charge?

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My friends and I have been to a number of financial advisers and they all seem keen about charging around one per cent plus. I have around $750,000 in my super fund and so I am being quoted $10,000 for the plan and $10,000 ongoing. That sounds pretty steep but I do have older friends with $2 million in their SMSF and they are being charged around $20,000 — there’s the one per cent figure again. How can I ballpark the kind of fees I should expect. 

It’s hard to generalise about fees because one client with $2 million could be really complex and time-consuming while another could be quite straightforward and so this person should be on a cheaper fee. For a $20,000 slug, and I know lots of advisers come at fees of these levels, the service has to be great and the complexity of the client’s circumstances needs to be very time-consuming. I also argue that the calibre of the service will be critical to the assessment of the fee. Generally for someone like you on $750,000, given the hours that have to be put in by an adviser to follow the letter of the law, you would be lucky to find a good adviser charging you less than $5,000 for a plan and $5,000 for the ongoing service. Some bank-related or insurance company-connected planners could come in with cheaper fees for the plan but they then could receive other payments from platforms or from insurance products that bump up their fees. Make sure you come to understand how your adviser is being remunerated and an honest adviser is duty bound to tell you. When I started my business we decided to make it simple by telling our clients what the charges would be and if there were any rebates connected to investment products, then we gave it back to the client. This is harder with insurance products because insurance companies want to pay that way and some advisers can put in a lot of hours trying to get coverage for a client and then the person’s health prevents them getting coverage from the best or cheapest insurers. Work on finding an honest upfront adviser who reveals all of the key costs and then you will be heading in the right direction with your search for a good adviser.

Published on: Tuesday, March 13, 2012

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