If you have ever heard the adage “You have to spend money to make money”? When it comes to your Financial Planner, nothing more is closer to the truth.
“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.”[1]
Although, this may be the case, like with people planning their superannuation and where they go (yes, that is also a function that you Financial Planner can do for you both through selection of super funds or SMSF, but more on that later), if you select the wrong plan or investment type, then over time this could cost you tens of thousands, even more!
While financial planning may be considered outside the budget of many Australians, giving up a couple of dinners out each quarter to cover the cost may be one of the most impactful and positive changes to your lifestyle you could ever imagine.
There are many elements to financial planning, and we will outline the initial and potential ongoing costs, then also the types of billing often undertaken by the industry.
It should also be noted that post the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there have been dramatic changes to ongoing, grandfathered and rolling commissions that were being paid for planners and advisors, ensuring that the industry provides a more level playing field and recommend the ‘right’ products to clients, not just those that have the largest ongoing payday.
So, how much should Financial Planning cost?
As outlined in previous chapters, with financial planning you need to look at your future, like a business would, and set up a business plan or a financial plan.
This detailed roadmap will typically cost between $2000 and $3000 from most planners, as there is a comprehensive review of your current situation, goal setting, gap analysis then a full review of the services and products that could assist in closing the gap between where you are and where you want to get to.
According to research by Investment Trends, on average you’ll be charged $2,250 in up-front fees the first time you see a planner. Younger clients (under 45) tend to pay half of what older clients pay on average ($1,200 vs. $2,600). This is because younger clients tend to have less wealth accumulated and require less complex advice.
Then when you continue your relationship with a planner, the average ongoing advice fees are approximately $3,450 per annum.[2] This continuation is almost as important as the plan, if not more-so.
The reason you need ongoing, meaningful support is to ensure that your plan stays on track, or iterates to support your new goals, objectives or circumstances. For example, you may come into some inheritance that you didn’t expect, you may lose a high paying job or you secure an opportunity to retire earlier.
Sure, financial planners can help you make money, save money, invest money and even get that boat or holiday home, pay your mortgage off sooner, all of which is incredible. More importantly, the small cost in the overall scheme of your income and expenses is that you are getting set up for your future.
[1] https://www.canstar.com.au/superannuation/financial-advisor-fees-cost/
[2] https://fpa.com.au/news/much-cost-see-financial-planner/