The average Australian believes that financial advice should cost just $300 per appointment, according to a survey to be released by Investment Trends this week.
The survey compared the views of more than 1,300 financial advisers against 1,100 investors, to determine whether the two groups shared the same opinions on the value of advice.
Preliminary results reveal that, on average, investors believe financial advice should cost, on average, $300 for the first visit and $300 for subsequent visits. Yet the survey of financial advisers found that the break-even cost of providing full advice was $2,700, and providing simple advice was $1,200.
Similarly, planners estimated on average that the cost of maintaining a client file, including periodic reviews, is $1,400 per annum, almost five times the “per-visit” fee consumers expected to pay for ongoing advice.
… our survey shows a striking disconnect between the expectations of planners and their clients
“At a time when planners are increasingly moving to a fee-for-service model, our survey shows a striking disconnect between the expectations of planners and their clients”, said Investment Trends Analyst Recep Peker. “It also suggests that many investors may be unaware of the true cost of advice under existing asset-based fee models.”
The survey did find that consumers were prepared to pay more to advisers for a review of their existing financial plan. According to Mr Peker this may be because these consumers have already had “first-hand experience” with a financial adviser.
In addition, the value that advisers themselves placed on advice also differed widely. The study found that the estimated break-even cost of providing advice varied from as little as $100 to as much as $10,000.
“Our survey reflects the diversity of financial planning businesses, which cover the spectrum from home-based businesses operated by a sole planner, to large dealer groups with hundreds of planners nationally”, said Mr Peker.
The Investment Trends June 2010 Planner Business Model Report is based on a detailed online survey of more than 1,300 financial planners conducted between 19 August 2010 and 10 October 2010. The survey investigated key features of financial planning practices, with a particular focus on the challenges posed by changes in the regulatory regime.
