Powered by MOMENTUM MEDIA
subscribe to our newsletter
FASEA reforms tipped to cause spike in advice fees

FASEA reforms tipped to cause spike in advice fees

Adrian Flores
30 January 2019 — 1 minute read

The incoming education standards for advisers are likely to see a significant increase in the advice fees charged to clients, potentially by as much as double, says the head of a dealer group.

Speaking to SMSF Adviser sister title ifa, Lifespan Financial Planning chief executive Eugene Ardino said that the more the industry goes down the path of charging for everything an adviser does for a client, the higher the cost of advice.

Now that advisers have to be degree-qualified and spend a minimum of three years at university on top of a professional year, Mr Ardino thinks advisers will not go through all of that to earn the average wage and, as a result, will charge higher hourly rates to clients.

Advertisement
Advertisement

“The unintended consequences of all of this is the entry to advice is going to be higher in terms of what it will cost to pay,” Mr Ardino said.

“If you’re expecting advisers to charge a fee every time they do something for a client, I expect fees to go up dramatically, like maybe two or threefold, if that’s how you have to run your business rather than having a sort of retainer arrangement.”

Another consequence, according to Mr Ardino, is that if some advisers have more passive income streams such as grandfathered trail commissions, then they will need to make sure the rest of their business is generating enough income for it to be viable.

“Look at all your client relationships. Look at your service agreements, and just make sure they are commercial. Make sure that you can provide that service for what you’ve quoted to be the fee,” he said.

“There are a lot of reasons why advisers might have an ongoing fee arrangement where they’re over-servicing the client relative to what they’re earning, and some of those reasons are going to be wiped out because of FASEA and the royal commission.”

Mr Ardino also said that it was more important than ever that advisers be able to demonstrate their value to clients.

“Despite the royal commission headlines, my experience with advisers indicates that most advisers don’t charge their clients anywhere near enough for the time, effort and service provided,” he said.

“So, just as important is to ensure that your service agreements are commercial and that you are not promising too much for too little and, as a result, not living up to what you have promised because it is unrealistic.”

FASEA reforms tipped to cause spike in advice fees
smsfadviser logo
join the discussion

Which political party will deliver better outcomes on superannuation policy?

SUBSCRIBE TO THE
SMSF ADVISER BULLETIN

Get the latest news and opinions delivered to your inbox each morning

In this month's issue:

  • Time wrap
  • The tech bull run
  • From hobby to passion
  • Golden Years
  • An untimely reminder
  • Why change is so difficult
  • Key Strategies for equalising super