Competition ‘eroding’ fees: Investment Trends

The widespread availability of scaled advice and increased choice for Australians to seek advice has led to the erosion of planners' upfront fees in order to remain competitive, according to Investment Trends.

Speaking to ifa, Investment Trends head of research, wealth management, Recep Peker said a review of fees charged by financial planners found advisers "do not make much money at all" in the initial upfront relationship with a new client.

In fact, Mr Peker explained that advisers are charging just enough to break even or sometimes even at a marginal loss.

He explained the reason why financial advisers are making so little on the upfront advice is because "competition has eroded" away upfront margins.


"[In Australia] you have scaled advice where banks can provide it, super funds can provide it, and clients essentially have a lot more choice when it comes to where they get help, so that level of competition has eroded away financial planners' upfront margins," he said.

Mr Peker explained that where financial planners are making their money is in the ongoing relationship with their clients.

"What happens for financial planners is they generally break even on the upfront relationship, or some may even make a loss, but they recuperate that through the ongoing relationship."

This is why advisers are in high demand for tools from platform providers that help prove the ongoing value they can provide to their clients, Mr Peker explained.

The analysis of adviser fees follows a recent study where Investment Trends compared the fees financial planners in the UK make compared with Australian advisers.

Mr Peker said the study found UK advisers make substantially more in the upfront relationship and ongoing relationship compared with Australia, with UK advisers charging up to four times the cost of delivering advice.

This is due to UK advisers – following the retail distribution review – focusing more on higher-income earners, he said.

Competition ‘eroding’ fees: Investment Trends
ifa logo

Subscribe to the ifa bulletin

Receive daily online news,analysis, reports and business strategies
By signing up you agree to our Terms of Use and Privacy Policy

from the web

Website Notifications

Get notifications in real time and stay up to date with content that matters to you.