A new report has revealed a jump in initial fees charged by advisers on a per advice document basis of 16 per cent — from $2,859 in FY21 to $3,315 in FY22.
The annual Advice Fee Data Report compiled by Padua, also revealed that ongoing advice fees charged by advisers on a per advice document basis rose from $3,656 in FY21 to $4,865 in FY22 — a significant leap of 33 per cent.
Commenting on the findings Padua Solutions co-CEO and co-founder, Anne-Marie Esler, said: “It’s no wonder the high cost of financial advice is frequently cited by Australians as the main reason for not seeking advice — especially when advice fees can rise by more than double the current rate of inflation.”
The Padua report is based on actual advice fee data aggregated from the 5 per cent of financial advisers using Padua’s software and services.
Citing reasons for the rapid increase in advice fees, Ms Esler said it’s down to a combination of a growing regulatory burden and an obvious adviser exodus which is depleting the industry.
Namely, since the end of 2018, financial adviser numbers have fallen by 43 per cent from 27,929 to 15,908 (as at 6 October 2022), placing further pressure on the sector.
“The mass exodus of advisers from the financial advice industry has only exacerbated existing concerns around the cost and accessibility of advice,” Ms Esler said.
“If we as an industry don’t work towards reducing the cost of providing advice, it will become increasingly inaccessible for most people, and especially those who would potentially stand to benefit most from financial advice,” she added.
The Quality of Advice Review (QAR) is expected to increase the accessibility of advice by simplifying reporting requirements on advisers and the cost of running an advice business.
Last month, the Joint Associations Working Group (JAWG) — made up of 12 key associations including the FPA, AFA, FSC, SIAA, TAA and CA ANZ — announced it has engaged with global market research consultancy, CoreData Group, to conduct a new survey to examine the cost of advice, which will then be provided to the QAR ahead of its release in December.
At the time, the Financial Planning Association of Australia’s (FPA) head of policy, strategy and innovation, Ben Marshan, said the research will “break down the cost impact” on the financial advice process of each component of the law, regulations and licensing costs.
“We’re encouraging all licensees and practices to take part in the survey which is taking place over the course of the next week.”
Participate in the survey here.
A 5 per cent sample isn’t a representation of the industry. The bodies that are part of “JAWG” are consumer centric and not representing the actual advisers. Why is advice being sought from a bank and or Tax bodies? It’s FPA and the AFA that allowed the layers of legislation initially. Why has the AIOFP not been approached and invited to the table? The FSC is also not acting in the interest of the Advice sector..
Makes plausible sense that those that’ enabled and supported the current issues advisers face, please get a panel that actually seek change to instil trust back into a sector that they have allowed to be decimated by in action and misrepresentation. FPA and the AFA are culpable and should have no input in any research or reform
Perhaps if it cost one weeks pay to get advice, it would then seem reasonable to receive advice. If the advice costs 5k, then salary would need to be 260k. 100k salary, 2k financial plan.
The comparison of the cost of providing advice in relation to the inflation rate is completely meaningless and irrelevant.
Suggested alternative headline: “Advice regulation & compliance costs far exceed inflation”
This would be accurate…but wait, there’s more…add $26,000 of CSLR and then do the calcs!
So the current cost of upfront advice is less than the previously calculated cost of that advice. I don’t think comparing fee’s to inflation is really the issue — it might be the unwieldy and unworkable requirements of providing advice. The ongoing fee also reflects the excessive requirements for the annual fee requirements.
…and the No Advice ROA…
I’m sure if regulations dictated that an electrician must rewire your whole house even though you only wanted them to change a light bulb, the cost of using an electrician would rise above the rate of inflation too