Two quotes arrive in your inbox. One puts a price on preparing a plan. The other describes a year of meetings and support. Setting them side by side tells you very little until you know what is included in each. Even the word “fee” can refer to several charges paid at different times to different businesses.
The scope begins to explain the gap. A financial adviser may prepare recommendations about one defined issue, develop a broader plan or provide ongoing support as circumstances change. Each arrangement involves different work and a different timetable. Some practices charge for preparing the initial advice, then separately for putting recommendations into action. Others may quote a package covering both stages.
A fee for preparing advice can come as a surprise to someone who expects to pay only if they follow a recommendation. Yet understanding a client’s circumstances and producing a written plan is work in itself. The Statement of Advice explains the recommendations and the reasons for them, along with the scope and costs. A client with several super accounts, insurance policies and investments may bring considerably more information to that process than someone seeking advice on one defined issue.
The method of charging changes the picture again. A practice may set a fixed price for a plan or charge by the hour for limited work. Continuing service might carry a fixed annual fee or a percentage based on the value of assets under advice. With a percentage fee, the dollar amount can rise as the portfolio grows even when the stated rate stays the same. Two clients can be quoted the same percentage yet pay different amounts each year. A quote expressed only as a percentage leaves an important number out of the conversation.
Some charges on a proposal do not go to the adviser at all. Investment platforms, fund managers and insurers may each have their own fees or premiums. An adviser can also receive a commission on some insurance policies, subject to disclosure and consent requirements. A client still needs to understand all of these costs, while keeping clear which business receives each payment. A total cost and a fee for the advice service answer different questions.
The Financial Services Guide should explain the practice’s services, fees and links to product providers. The written advice should also show the fees associated with any recommended products and who receives them. These documents are especially useful when a conversation about an upfront price gradually expands to include implementation or continuing service. The extra work might be valuable to the client, but its price and timing should be visible.
An ongoing arrangement raises its own practical questions. Does the quoted amount cover scheduled reviews, help between meetings and changes to the plan, or are some of those charged separately? In Australia, ongoing advice fees require annual written consent, with details of the services to be provided. If an agreement promises two review meetings, it should be possible to see when those meetings will happen and what support is available in the meantime.
