Data suggests many advisers don’t charge enough

Mike Taylor

Managing Editor/Publisher, Financial Newswire

4 November 2021

The cost of providing financial advice may be rising but that reality is not being reflected in the actual fees financial advisers are charging their clients.

Data relating to actual fees charged to advice clients suggests that many advisers are charging fees less than the value of the time it takes to produce that advice.

The data, compiled by Padua Financial Group and provided to Financial Newswire, reveals that contrary to industry suggestions that the average fee charged by advisers is around $3,500, the reality last financial year was closer to $2,500, albeit that it has risen over recent months to closer to the $3,000.

What is interesting about the data is that it reveals that advisers working for major licensees such as those who are members of the Financial Services Council (FSC) were last financial year charging lower average fees than those working for smaller licensees.

The data show that on an ongoing per centage basis, those advisers operating under smaller licenses were charging an average of 0.81% last financial year, compared to 0.89% for those operating under the larger licensees.

The data around actual fees being charged comes against the background of research undertaken by the FSC by KPMG suggesting that the cost per client of the current advice process within the existing regulatory regime being $5,334.

The KPMG white paper suggested that with appropriate regulatory changes the cost of providing financial advice per client might be reduced to around $3,466.

Padua’s co-founder, Matthew Esler said the data suggested that while the cost of advice was rising many advisers will still billing at fee levels which did not reflect the reality of those costs.

“When they talk about fees, there are the fees they know they should be charging and there are the fees that are actually being charged,” he said.

Padua derives its data from the fees being charged by the financial advisers working under the licenses of the company’s clients.

The data around actual fees being charged comes amid other industry research suggesting that the COVID-19 pandemic has created significantly increased demand for financial advice but that perceptions around high fees remain a major constraint for many potential clients.