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What Price Financial Advice?

By August 30, 2017March 15th, 2019Advice, Planning, Uncategorized

There are lots of misunderstandings when it comes to the advice that financial advisers can offer. At the heart of the misunderstanding is the misconception that financial advisers only “sell” investments or life insurance. The natural progression of this from a client standpoint, is that unless they have money to invest or want some life insurance, there is no point in talking to a financial adviser.


For years the financial advice profession (loosely termed) has been declaring that it provides so much more than investment advice.Advisers have stood up proudly at conferences spouting that they do everything connected with money for their clients. The regulator has been assured that their income is justified because of the value that they add to their clients lives.

So why do so many base their fee on a percentage of the investment assets they “manage” for their clients. Clients have been convinced that for as little as 1% (or .6%, or 1.25%) of their investment assets, the adviser will take the worry out of looking after their investments for them. Is this truly a fee or is it just a proxy for the “commission” they used to receive for selling the product? More particularly, if they do so much more for their clients, then why do they base what they are paid on only one part of the client’s financial world – their investments? Why do so many advisers, both here and overseas, have minimum investable funds before they consider taking on a client? Is this because with fees based on a percentage of assets, they can’t generate sufficient revenue to look after a client unless they have half a million or a million dollars-worth of funds to invest?

To be clear, can we really argue that on the “investment” side of things, there is more for an adviser to do for a client who has $1,000,000 with him than one who has only $500,000? Is investable assets any indication of complexity? In my own case, my two largest invested clients are also two of the easiest to look after. Their affairs are really simple, the revenue from their investments is more than adequate to produce the income they need to live on. To be sure, they both have a self-managed superannuation fund, but all of their investments are in it, and if I was starting afresh with them, they would not have this structure. For now, there is no cost imperative to change. Being responsible for several million dollars of someone else’s money keeps me awake at night so they pay a little more, not much, but a little.

Contrast this with the guy who has $350,000, is constantly worried about money and so calls us all the time, needs our help with applying for Aged Pension, has maxed out credit cards, is behind in his bills and spends more than he can afford. Somehow this is all my fault. Who should pay more? (He does).

The real point of this article is to draw your attention to that other guy or girl. The one who is just starting out. The one who needs help getting rid of their credit card debt. The one who needs help with managing their cash flow on a month to month basis. The one who is not sure whether he will ever be able to afford a house deposit so does nothing. The one who would really be in a pickle if he was unable to work. The one who needs help working out whether he and his partner can afford to start a family.

At our firm, we offer a fixed fee monthly subscription service which will enable us to do what we need to do to help these folk. Many don’t have sufficient funds to allow for an up-front payment, so we eliminated that. Most have little or no investable assets outside of their compulsory super, and this is not the focus of our work anyhow. Debt reduction, cash flow management, goal setting, protection considerations, accountability are what they need most, and we believe this is a way we can deliver it. One day, investing might be part of their world, but probably not for some time. These are the people who most need our help, and we believe we have found a way to be able to serve them.

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