Costs of Financial Planning Advice

Hi Terry,

I can tell you from experience that clients are not willing to pay anything! Nor should they, The client has to pay a management fee inside an investment (it is these managers that are doing the research and hard work). I have many clients see me with managed funds (including super). When you get down to the nuts and bolts I find many advisers are placing people in products that they have no idea about. So the client pays the management fee to the fund and the FP will then ask for a fee on top of this. You have to ask, "Who owns the top 100 FP firms in Australia and why"? There lies the answer to the great Australian FP scandal…..

Further, have look at the management fee's that are charge by large financial institutions vs industry (not for profit) you will find the difference is about 2% vs 0.5% – Is an aggressive / assertive asset class from one company to another really that much in cost? i.e. Are the investments that different? In fact you will be surprised when you consider the past performances. 

Here is a tip: the institutions paying for high flying executive, paying dividends to shareholders and making multi-billion dollar profits must get their money from somewhere? When you answer this thought, you will say, "That's not where my money needs to be".

To evidence the comparison in super funds, go to the FSS website and under the compare us tab, take a look for yourself….

http://www.birchcorp.com.au 

Hi Terry,

I did pay $1100 once (few years back now) which was inc of 'unlimited consultations per annum) but only left in place for a year – and being an amp guy not a lot of value for money. He ended up taking some of my advice though and selling some of his share portfolio to pay down some of his non deductible debt……
I'm just about to enter the FP industry myself (almost done the DFS….) and will be interesting to see exactly how things pan out in the 'fees' area. The bank I last worked for I got on ok with the FP's (even though I used to hang heaps of muck on them…..as you do……. ) and I often saw quotes for $3500 up to $7000 (I believe there were some higher too) and cannot imagine there would be many 'average' people that would have that $ laying around – whereas they might have been happy for 'free' or 'discounted' costs when the planner is getting 4 or 5% commission on everything they 'sell'.
While I believe on the surface it seems a lot of money, IF it helps anyone on the road to long term wealth, and assistance meanwhile it is a drop in the ocean – but not sure how many will/would see it like that.
Yet, people are happy to spent triple that on a buyers agent, or thousands per year on 'wealth creation/property secrets' type seminars and do /get nothing…….
My 3c worth is I think it will make the advising/planning market more select & specialized, but appeal to or only be within reach of a much smaller potential client base.
Probably got a bit off track there to your original question however……..

Agree.  Financial planning should be free as most of the time it is wasted money.  Financial planning is good for people with poor knowledge, low income earners, people who can't generate income from businesses or property developing.  This is most people but fees should be small as value is small.

Most planners just put people into an industry fund and that is it.  I went to a planner and saw him driving an old car in old offices.  I am not going to take advice from someone who makes less money than I do.  They never advise on private business acquisitions, never advise on property development and property joint ventures because they say ASIC cant let them advise.  Well just ring up AMP and ask to be put into a balanced portfolio fund.  Financial planners are a waste of time and hopefully these changes mean many go because they dont do much for their money.

When I purchased my first block of land I sought the assistance of a financial planning company. Their service fee was $7,000. This is an enormous amount of money for a first home buyer however I could see the value that good financial advice could offer to my life. I wanted to know all the tricks as to how to best use my money (how much to pay off my loan, when and where etc) I thought that the $7,000 would pay itself off quickly if I had someone to advise me of how not to make the same mistakes the general public make with their money everyday. 

So how did it go, well after a few weeks of too-and-fro they advised they were unable to find a lender for my purchase. I went out myself spoke with many lenders and found a suitable loan that suited my needs and which I could afford. I took this information back to my planner. I worked personally with the bank manager to effect the loan.

Within a couple of weeks I received my invoice for $7,000.. pfft! I went in and saw my planner, advising him that there was no chance in me paying the invoice as they had not provided any form of service. He was new to the industry and was being assisted by the company CEO/director. I told the planner what I had learned from my process and what I thought about his company.

He thanked me and resigned that day!

That said, I still believe that good financial advice is worth paying for. But I cant find a good accountant, good finance advisor, nor a good mentor to assist me in how to maximise my money. Granted I don't have a lot, but I know the key to having more is not in what I am earning it's in how I use what I have. And we all have to start somewhere.

And from what i read it is something that a mortgage broker could have done for you for nothing.

Thanks number 8, I'll look up your location.

I had several years up my sleeve, and I decided to give a little grief to all the financial institutions and like who who tried to take my money will I was creating wealth.

http://www.birchcorp.com.au

Evolve, The issue I have is that most planners have never made any real money.  They go around telling you how to invest and how you should have a diversified portfolio.

I own, through a variety of structures, 5 coffee shops, 7 radiologicy clinics, 2 newsagents and over 30 commercial properties. A planner never recommended any of them and they are not allowed to.  Theyare useless in my opinion when they say oh you are too heavily invested in commercial property.  well young man (im 62 and most of them are under 30) when you acquire some real wealth then you can advise me. 

I do feel for you evolve as the industry is full of incompetent fools and being a chartered accountant you are not one of those.  concentrate on your accounting, i pay my accountant over $100k in fees per annum, so there is good money in it.  my accountant has helped enormously with my businesses and in fact the radiology clinic boomed from a few of his ideas.  Keep up the good work.  I have more respect for accountants than planners.  Never dealt with a mortgage broker so no idea what they are like.

I hope you are photogenic then RIchard!
Seriously, a big congrats and I'll lash out and buy that one for a look,

Cheers

Hi Number 8.
I'll have to wait and see. I would prefer not to return to a bank in a planner role, and would love to do the independent thing in my own business (again – but have not owned a businees in th finance industry). I like helping people, and doing loan interviews/insurance/strategy planning etc etc and there is a real buzz to helping get peiple into their 1st investment property or see them wake up and pay down some personal debt & start saving some $. If no one pays though I'm knackered I guess. I think an hourly rate makes more sense than big comms – even if the client only uses you as a 'sounding board' and discusses 'general advice; with you because there is more chance I can make a difference.

I guess we'll see how it works out. All the best.