How Aussie advice fees compare to global markets

The Australian advice sector is leading the world in its adoption of fixed and hybrid client fee models, with other nations across the globe beginning to follow suit.

In a recent blog post, Global Adviser Alpha founder David Haintz said Australian advisers remained “well ahead of the bunch” in terms of evolving to a more modern fee model, with 69 per cent of advice practitioners now charging fixed fees, according to recent Adviser Ratings statistics.

The data revealed that a further 24 per cent of advisers had adopted a hybrid fee model, while average fees charged had risen by 12 per cent from 2018 to 2019.

Mr Haintz said a continuing focus on delivering value to clients would see more advisers move to specialised target markets, enabling them to charge higher fees for bespoke services.

“This is the crux of it for the industry – in future, value will lead price rather than vice-versa,” Mr Haintz said.

“And that, more than anything, is a sign of how important it will be for advisers to be able to clearly articulate the value of their services in a new, more competitive environment.”

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Mr Haintz, a founding director of the now IOOF-owned Shadforth Financial Group, said markets such as the US and Asia were well behind Australia in terms of moving away from asset-based fees and commissions, but that both were slowly moving towards a fixed-fee model.

He cited a study from US financial journalist Bob Veres that showed while 73 per cent of advisers still relied on asset-based fees, this figure had declined by around 10 per cent over the past five years and many advice firms were now moving to a mix of asset-based and retainer fees.

“Veres takes this trend toward hybrid compensation structures as evidence of a way of serving younger or less wealthy clients,” Mr Haintz said.

“And it is a trend that is accelerating, with about a third of participants anticipating making changes to their revenue models.”

Mr Haintz added that while advisers in Asian markets were “still stuck in a commission-driven pricing model”, Taiwan had moved down a similar path to Australia in banning adviser commissions earlier this year.

How Aussie advice fees compare to global markets
David Haintz
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