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With everyone talking about the high cost of living these days, most of us have spent at least a few minutes taking a closer look at our finances and possibly our retirement plans.
That’s where some independent professional guidance can make a difference, rather than struggling through on your own or burying your head in the sand.
Despite this, the number of people seeking financial advice remains low. In fact, in 2024 research firm Investment Trends found 11.2 million Aussies had unmet advice needs, despite 60% of them understanding the benefits they would receive from getting advice. On the positive side, 1.3 million unadvised people were planning to seek out an adviser in the next two years.
Although cost is obviously an issue for many households, getting the right advice can be cost-effective in the long run. It’s a matter of figuring out what type of advice is on offer and where you can get it.
Step 1: Understand what advice is available
Although it can be tough to know what advice you need if you’ve never spoken to a financial adviser, the first step is to ask yourself whether you want help with your overall financial circumstances or just one specific issue.
The rules around providing financial advice in Australia are quite strict to protect consumers, with the main types of advice being:
- General financial advice: This is general factual information about financial products and cannot include a recommendation or suggestion that a particular product is the best one for your particular situation.
- Personal financial advice: This is personalised advice by the financial adviser you select and recommendations for specific financial services or products. Before providing personal advice, the adviser must consider your individual objectives, financial situation and needs. The adviser must also make their recommendations in your best interests and disregard any benefit they may receive.
- Tax (financial) advice: Tax (financial) advice includes areas such as the tax impact of commencing a salary-sacrifice arrangement, transition-to-retirement pension, or your capital gains tax (CGT) liability if you sell some investments.
From 2022, when financial advisers are recommending a financial service or product, they are not permitted to provide advice about its tax implications for a fee unless they are a ‘qualified tax relevant provider’. They must have the necessary educational qualifications and be listed on ASIC’s Financial Adviser Register as a tax relevant provider. (Advice providers who were previously registered as individual tax (financial) advisers with the Tax Practitioners Board must now be registered with ASIC.) - SMSF advice: Financial advice is often necessary when establishing or running an SMSF. This is a specialised area requiring advice from an experienced financial adviser or an accountant who holds an Australian Financial Services Licence.
Step 2: Check out free and cheap information services
Believe it or not, there are places to get free or low-cost financial information and advice – although it will not be tailored to your individual circumstances:
- Government agencies: Services Australia’s Financial Information Service (FIS) and ASIC’s MoneySmart website are good sources of free information. The ATO website also regularly publishes information on super, SMSFs and tax-related matters.
- SuperGuide website and newsletter: Although SuperGuide does not offer financial advice, it provides lots of current information, articles and tools on the super rules, retirement planning and the Age Pension rules. If you’re not already a subscriber, consider joining SuperGuide Premium here.
- Super funds: Most super funds offer their members:
- Online tools and calculators to help you budget and manage your finances better, explore the impact of making extra contributions and work out the right level of insurance cover for your circumstances.
- Educational seminars on super and retirement. A financial adviser is often available to answer basic questions, but personal discussions require a follow-up appointment.
- Intra-fund advice on issues like changing your investment option, increasing your contributions into the fund, your insurance cover provided by the fund and the types of cover that might be suitable for you and nominating a beneficiary. This is simple information only and can’t tell you what to do. For example, it can’t cover advice on whether you should switch super funds, consolidate several super accounts into a single fund, invest in financial products outside super, or establish a personal retirement plan.
Step 3: Decide the level of paid advice you need
Although free or low-cost information is great, if you need more detailed, tailored advice, you’ll need to pay for it. This is what ASIC calls personal advice, but you can still choose the level of advice:
- Simple, single issue or ‘scaled’ advice. This is advice about a particular issue and doesn’t take into account your full financial situation. For example, you may want advice on whether to increase your insurance cover or how much to contribute to super.
- Full or ‘holistic’ advice. If you need help with your overall financial situation through a comprehensive financial plan, you need holistic advice. This covers areas such as budgeting, retirement planning, starting a pension, investments outside super, insurance and planning how your assets and estate will be distributed after your death.
- Ongoing advice. With this type of advice your adviser monitors your investment portfolio and holds regular reviews with you to check your financial position and how your financial goals are progressing.
Step 4: Select who to ask for advice
Both limited and full financial advice is readily available from:
- Super funds. Most funds have licensed financial advisers on staff or have an agreement with a licensed advisory firm to provide personal financial advice to fund members. On-staff advisers are paid a salary and do not receive incentives, bonuses or commissions for their advice to fund members.
- External financial advisory firms. These firms are selected by your super fund, which often negotiates a set of principles to ensure the interests of fund members are protected. Some super funds permit super-related advice fees to be deducted from your super account balance, but you will be provided with information about this option when you speak to the adviser.
- Advisory firms. Financial advice is available from small local firms, national advisory networks and licensed employees of large financial institutions (although most of the bigger banks have sold their advice arms following the damning Hayne Royal Commission into financial services). Whichever advice provider you choose, the individual adviser should be licensed and listed on ASIC’s Financial Advisers Register to ensure they have the necessary qualifications and experience.
Accountants and financial advice
Unless they are licensed to provide financial advice, accountants are prohibited from providing personal financial advice. This includes advice to not invest in or to sell a financial product. They are, however, able to comment on the tax implications of an investment.
As explained in Step 1 above, if you want financial advice about your SMSF, your accountant will need to hold an AFSL (or be authorised under another AFSL) to provide anything other than simple financial advice. They can assist with basic SMSF administrative tasks (such as the paperwork for fund establishment and rollovers) and provide factual information about investments and strategies, but they cannot provide advice about the suitability of an investment product or strategy for your fund.
Step 5: Work out the cost of advice
Fees for financial advice depend on the complexity of your personal financial situation and the services you need, plus the method of charging used by your chosen adviser. Typically, it’s free to attend an initial consultation to discuss your needs and the adviser will then provide information about the likely costs.
According to industry research by Adviser Ratings, in 2023 the median fee clients paid for advice was close to $4,000. Only a minority (6%) of advisers charged fees below $1,500 for new clients. Cost represents a major sticking point for many people currently without an adviser, with the Investment Trends research finding unadvised consumers often cited high (41%) or unclear (30%) costs as barriers to them obtaining advice.
If you decide to proceed after the initial meeting with your chosen adviser, you will receive a written quotation to sign prior to a fee being charged.
Normal advice costs can include:
- Statement of Advice (SOA) fee. Your adviser will write a formal document outlining their recommendations and financial plan. The one-off SOA fee is based on the complexity of your particular situation and can vary considerably, ranging from several hundred dollars to a few thousand dollars. Usually you can either pay the fee yourself, or have the cost deducted from your investments. The SOA fee must be paid even if you decide not to proceed with the adviser’s recommendations.
- Implementation fee. Once you accept the SOA recommendations, there is often an administration fee for implementing them. The amount depends on the complexity involved, but it is usually a few hundred dollars.
- Ongoing service fees. If you want ongoing services such as regular reports on your portfolio, or annual reviews with your adviser, there are additional costs.
It is always disappointing that after $b in fees & profits, with YOUR money; thousands of dollars are requested/required by the fund for a ‘whereto ‘ from here!
as a self-planner for many decades – now retired with enough – I’ve always been intrigued by most people’s ‘can’t be bothered’ – ‘budgets are boring’ – laughing at my frugality (guess who’s got money in the bank that they don’t?) – then they tell me they don’t expect to ever be able to afford to retire – hmmm – any connection ?
don’t know whether it starts with poor maths – teachers instilling a fear of arithmetic
but when neighbours tell me – ‘I trusted that nice man in a suit – how come it cost me thousands of dollars ?’ – I just shake my head – I’ve always done my own research, made my own decisions, I realize most ‘advisors’ are vested-interest working for banks’ profits. ‘We’ll take care of – all your money’ – hmmm – no thanks – no one cares better of my money – than the Holy Trinity – me, myself and I.
Very well done.Good on you ,I am just exactly the same.Amal
It is interesting that they have the type of advice available that just helps you to make your own decision. This is kind of cool, it sort of goes along with the “if you give a man a fish” principle don’t you think? That being said, it is also really helpful to get straight up personal advice, so I appreciate all of your helpful information. Thank you!