How much does it cost to hire a financial planner?

A financial planner with a solid financial plan over your lifetime can save you tens or hundreds of thousands of dollars of your financial journey, even more! That may sound unrealistic, but if you look at starting small, investing a little, if you put $100 per month in an investment account with a compounding interest rate of 11% – rather than buying your coffee every morning, over 30-years, that would be $280,000 in your pocket[1]!!

But what does it cost to get this sort of advice cost you to get set up, and cost you ongoing to maintain?

Despite the example above, and thousands more like it on how by making little changes to your life and lifestyle, you can set you and your family up for the future, there are huge barriers for people sitting down with a financial planner.

According to Canstar, for many Australians, one of the big barriers to getting financial advice is the cost. In 2019, ASIC research found that 41% of Australians intended to get financial advice in the future. Despite this, 35% of respondents said one reason they did not or might not get advice was because they thought it was too expensive.[2]

How fees are changed for financial planning services

Depending on what services you are getting, there are different types of fee structures that you may be charged by your financial planner for service.

We have outlined these below taken from the Australian Governments Money Smart website:

Fixed fees

• Statement of Advice (SOA) fee — A one-off fee for preparing your SOA. This fee is either paid up-front and deducted from your investments or added to ongoing fees for service.
• Fee to implement financial advice — A one-off fee for implementing financial advice — for example, opening accounts and purchasing investments. This can be an up-front fee based on the value of your assets.
• Fee for ongoing financial advice — An ongoing fee for advice and services, like reviews, reports, phone calls, emails and newsletters. This is often a monthly fee.
• Fee for review — A one-off fee for reviewing your financial plan and implementing any changes — for example, changing your investments to align with your goals.
• Investment platform fee — Fixed fee for the administrative financial platform
• used to manage your investments.
• Hourly rate — Fixed fee per hour to answer one-off questions that are not part of ongoing advice or services.
• Fee for service — Fixed fee for a service or a type of advice, for example, preparing your Statement of Advice (SOA)

Percentage-based fees

• Asset-based (portfolio percentage) — Percentage fee based on the total value of the assets in your portfolio. The more assets you have, the higher the fee. You pay this fee regardless of how well your investments perform.
• Investment management fee (performance percentage) — Additional percentage fee, based on the performance of your investments (usually measured by an agreed benchmark).[3]

What are the costs of seeing a financial planner?

The cost of seeing a financial planner can range from $2,500 to $3,500 to set up a plan, and then about $3,000 to $3,500 annually if you have an ongoing relationship with the planner, according to the Financial Planning Association (FPA).[1]

This should include at least a quarterly meeting to review your benchmarks & goals, investment activities, reporting and planning outside of the time you spend with your planner.

Put this into perspective with the example we gave before on the $280,000 through investing just $100 per month. This is only one of many strategies and savings you would make through a financial planner implementing a strategy for you.

Even at $3,500 for an initial consultation, then $3,500 per year, every year for 30 years, that would cost you $108,500 over 30 years. So already, you are $171,500 in front, using one basic and easy to use strategy – imagine how far you could be in front with ten different strategies all working together!

Just like your latest ‘Catch of the Day’ purchase, “its not about what you spent, its about what you saved”, financial planning is the same. By spending a little now, in the short, medium and long term you could have significant inroads, and financial freedom you never realised possible.

The question should not be “can you afford to spend money on a financial planner?”. It really needs to be, “Can I afford not to spend money on a financial planner?”.

[1] https://www.canstar.com.au/superannuation/financial-advisor-fees-cost/

[1] https://www.ramseysolutions.com/personal-growth/setting-financial-goals

[2] https://www.canstar.com.au/superannuation/financial-advisor-fees-cost/

[3] https://moneysmart.gov.au/financial-advice/financial-advice-costs