The Government is about to reform the way Fin Planners get paid for their services
Upfront and trail commissions will be banned and this will mean, probably, that many financial planners will be introducing fees to clients to do a financial plan. They will also likely charge an annual fee for funds under management (though will only be able to do so on ungeared amounts).
What I would like to know is how much have people paid for plans in the past and what would you be willing to pay in the future (if anything)?
I can tell you from experience that clients are not willing to pay anything! Nor should they, The client has to pay a management fee inside an investment (it is these managers that are doing the research and hard work). I have many clients see me with managed funds (including super). When you get down to the nuts and bolts I find many advisers are placing people in products that they have no idea about. So the client pays the management fee to the fund and the FP will then ask for a fee on top of this. You have to ask, "Who owns the top 100 FP firms in Australia and why"? There lies the answer to the great Australian FP scandal…..
Further, have look at the management fee's that are charge by large financial institutions vs industry (not for profit) you will find the difference is about 2% vs 0.5% – Is an aggressive / assertive asset class from one company to another really that much in cost? i.e. Are the investments that different? In fact you will be surprised when you consider the past performances.
Here is a tip: the institutions paying for high flying executive, paying dividends to shareholders and making multi-billion dollar profits must get their money from somewhere? When you answer this thought, you will say, "That's not where my money needs to be".
To evidence the comparison in super funds, go to the FSS website and under the compare us tab, take a look for yourself….kong71286Participant@kong71286Join Date: 2009Post Count: 261
Thanks for the update Terry!
I did pay $1100 once (few years back now) which was inc of 'unlimited consultations per annum) but only left in place for a year – and being an amp guy not a lot of value for money. He ended up taking some of my advice though and selling some of his share portfolio to pay down some of his non deductible debt……
I'm just about to enter the FP industry myself (almost done the DFS….) and will be interesting to see exactly how things pan out in the 'fees' area. The bank I last worked for I got on ok with the FP's (even though I used to hang heaps of muck on them…..as you do……. ) and I often saw quotes for $3500 up to $7000 (I believe there were some higher too) and cannot imagine there would be many 'average' people that would have that $ laying around – whereas they might have been happy for 'free' or 'discounted' costs when the planner is getting 4 or 5% commission on everything they 'sell'.
While I believe on the surface it seems a lot of money, IF it helps anyone on the road to long term wealth, and assistance meanwhile it is a drop in the ocean – but not sure how many will/would see it like that.
Yet, people are happy to spent triple that on a buyers agent, or thousands per year on 'wealth creation/property secrets' type seminars and do /get nothing…….
My 3c worth is I think it will make the advising/planning market more select & specialized, but appeal to or only be within reach of a much smaller potential client base.
Probably got a bit off track there to your original question however……..dakkar2010Member@dakkar2010Join Date: 2010Post Count: 2
Agree. Financial planning should be free as most of the time it is wasted money. Financial planning is good for people with poor knowledge, low income earners, people who can't generate income from businesses or property developing. This is most people but fees should be small as value is small.
Most planners just put people into an industry fund and that is it. I went to a planner and saw him driving an old car in old offices. I am not going to take advice from someone who makes less money than I do. They never advise on private business acquisitions, never advise on property development and property joint ventures because they say ASIC cant let them advise. Well just ring up AMP and ask to be put into a balanced portfolio fund. Financial planners are a waste of time and hopefully these changes mean many go because they dont do much for their money.
Thanks for all the comments. I agree with them all. There are some shocking fin planners out there charging a fortune for doing little.
When I purchased my first block of land I sought the assistance of a financial planning company. Their service fee was $7,000. This is an enormous amount of money for a first home buyer however I could see the value that good financial advice could offer to my life. I wanted to know all the tricks as to how to best use my money (how much to pay off my loan, when and where etc) I thought that the $7,000 would pay itself off quickly if I had someone to advise me of how not to make the same mistakes the general public make with their money everyday.
So how did it go, well after a few weeks of too-and-fro they advised they were unable to find a lender for my purchase. I went out myself spoke with many lenders and found a suitable loan that suited my needs and which I could afford. I took this information back to my planner. I worked personally with the bank manager to effect the loan.
Within a couple of weeks I received my invoice for $7,000.. pfft! I went in and saw my planner, advising him that there was no chance in me paying the invoice as they had not provided any form of service. He was new to the industry and was being assisted by the company CEO/director. I told the planner what I had learned from my process and what I thought about his company.
He thanked me and resigned that day!
That said, I still believe that good financial advice is worth paying for. But I cant find a good accountant, good finance advisor, nor a good mentor to assist me in how to maximise my money. Granted I don't have a lot, but I know the key to having more is not in what I am earning it's in how I use what I have. And we all have to start somewhere.Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
And from what i read it is something that a mortgage broker could have done for you for nothing.
Richard Taylor | Australia's leading private lender
There is a revolution happening on this site, FP's are a thing of the past and Mortgage Brokers will rule the world…….
Dakkar2010, Planners very rarely use industry funds as their is no associated fee for them. You will find they all use retail funds.
Intrigue, next time, drop into my office and I will make your $7 that you spent on fuel worthwhile (assuming you live at the end of my street) – Forget the invoice for $7000.
Thanks number 8, I'll look up your location.
hee hee. A little curiosity had me look up that financial planning company to see if they are still operating.
It seems they are however that Director/CEO was found negligent by ASIC and has been banned from offering any financial advice until 2012 (or so the news article reads). That said he is still the director of the company and his associates are permitted to offer financial advice so I guess others are yet to share my experiences.
number 8, thats a hell of a website you have there. I'll have to give it some of my time to read thoroughly.Grow SMSFParticipant@evolveJoin Date: 2009Post Count: 66
Wow – reading this thread has been a lot of fun.
I just want to point out that this is a property investing forum – so a lot of the post / comments are from people who are into doing it themselves via property.
Before I comment, I will disclose a few things about myself:
– I am a chartered accountant and SMSF specialist adviser (SPAA)
– I also have a Diploma of Financial Services (DFP) – however I don't consider myself a financial planner
– I have been working as an accountant since 2002
I would hazard to say that the comments relating to financial planners being worth zilch are based on the fact that people have not received value (or perceived value). This is because as people have commented, all many financial planners do is sell people a product for a commission or fee – there is no actual planning!
I believe that people are willing to pay for a service they get value from – and quite frankly the a lot of financial planners have not provided value so don't deserve to get paid! This goes for all services such as accountants, lawyers etc also.
I think that old mate (number8) from Birchcorp has an interesting business model – give free financial planning and make money from the insurance commissions. This is a nice point of difference – good luck with it!
In regards to the comments about planners not being able to give advice on property, property development and business acquisitions – why would they? In addition to ASIC regulations and their own AFSL licence holders preventing them, chances are they can't get their insurance to cover advice on such things either! If you want that type of advice hunt down an expert in the area (such as an accountant or lawyer).
Mortgage brokers don't work for nothing – they earn commissions on the loans they write / broker – which is cool as they normally earn it and the majority of people would rather that commission go to their friendly neighbourhood broker rather than the big bad banks!
In a lot of cases it is extremely difficult for any person who provides a non-tangible service such as financial planning, accounting or legal advice to show the true value of the service they provide.
I feel sorry for financial planners (especially the good ones – and I know a couple of superb ones*) – they simply can't win: If they put a portfolio together for the client and it does well, the client complains because his/her mate is getting 0.5% more than they are (or they say they are), and they get flogged when their portfolio goes down – even though it might not be going down as much as the average punter!
In addition, people generally don't like to accept blame for their own mistakes – especially with money – which is why the cost of financial planning services has increased so much in the last decade – people have tried (sometimes successfully) to sue financial planners, so their PI (public indemnity) insurance goes up. Not to mention the ridiculous amount of red tape planners have to go through to do their job – this distracts from the actual advice!
*FYI the superb ones practice what they preach and are doing very well for themselves.
If you are crazy enough to enter the financial planning industry (v8ghia I am looking at you) then you need to have thick skin and hopefully the ability to provide (and more importantly SHOW) true value. Possibly the worst job in the world.
Education is good to assist you make good wealth building decisions, however not everyone can be an expert at all things – hence why people seek advice from experts.
I am sorry if this comment seems like a rant – I hope it provides some value and a different perspective.
Evolvedakkar2010Member@dakkar2010Join Date: 2010Post Count: 2
Evolve, The issue I have is that most planners have never made any real money. They go around telling you how to invest and how you should have a diversified portfolio.
I own, through a variety of structures, 5 coffee shops, 7 radiologicy clinics, 2 newsagents and over 30 commercial properties. A planner never recommended any of them and they are not allowed to. Theyare useless in my opinion when they say oh you are too heavily invested in commercial property. well young man (im 62 and most of them are under 30) when you acquire some real wealth then you can advise me.
I do feel for you evolve as the industry is full of incompetent fools and being a chartered accountant you are not one of those. concentrate on your accounting, i pay my accountant over $100k in fees per annum, so there is good money in it. my accountant has helped enormously with my businesses and in fact the radiology clinic boomed from a few of his ideas. Keep up the good work. I have more respect for accountants than planners. Never dealt with a mortgage broker so no idea what they are like.Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Oh what a lovely hornets nest we have stiring here.
I am with number 8 and again charge no fees for any the financial planning advice i give my clients.
I do recommend property (as i own one or two of them myself) and only started my mortgage broking business to help others get some real genuine independant free advice.
Yes i admit we get paid a commission (in most cases) for the loans we place but honestly it is not that i do it for the money but more to build a business for my children to take over in the next couple of years.
I also pay my Accountant a significant amount each year but find him worth every dollar.
Sometime i get rather frustrated when you see people on this site selling there wares of wealth when really they have no more than the shirt they are wearing.
Like number 8 i retired at 40 living off my property income and if in doubt you can read about it in this months API Magazine.
Richard Taylor | Australia's leading private lender
I hope you are photogenic then RIchard!
Seriously, a big congrats and I'll lash out and buy that one for a look,
Please do not pretend you know me or my business model, you are so far from the truth that you have embarrassed yourself. You may need to speak to the many many clients that have come and gone through this office without a fee.
My legacy is not to create this great fat profit, but to give back to the many who may be…..if you want to know my model please join me on a weekend of training for Canberra Half Ironman this year (although given your response above it sounds like you know that I have spent 15 years as a competitive triathlete and it is a passion of mine).
I am happy for us both to open financials publicly to show people what we in fact earn (lets see how much free advice we really give) Insurance income for me was approximately $20k this year and my license and insurance was approximately $16k. With the $4k I am happy to give this to charity as long as you match me?
I read a post of yours last week on SMSF and appreciate you have a lot of knowldge in this field (I did some time with an SMSF auditor). I read many comments on this site that require a lot of help from a guy like yourself, as many of the comments/ help posted here are not entirely correct, as you read on the particular post I am referring. It may be a good idea if you could help me in guiding people for free rather than making assumptions.
Dakkar2010, I am sorry you feel that way about the industry, and I guess you will find no value on this site as the help/ advice is often from FP's.number 8 wrote:Hi V8ghia,
I think you will find these fee's of $7000 and 4-5% are a thing of the past. I do not have any fees attached to my practice. I do not know anyone that is paying for a Planner.
Hi Number 8.
I'll have to wait and see. I would prefer not to return to a bank in a planner role, and would love to do the independent thing in my own business (again – but have not owned a businees in th finance industry). I like helping people, and doing loan interviews/insurance/strategy planning etc etc and there is a real buzz to helping get peiple into their 1st investment property or see them wake up and pay down some personal debt & start saving some $. If no one pays though I'm knackered I guess. I think an hourly rate makes more sense than big comms – even if the client only uses you as a 'sounding board' and discusses 'general advice; with you because there is more chance I can make a difference.
I guess we'll see how it works out. All the best.