How do financial planners charge?

By John Hollyman20 May 2015

Since the financial planning industry emerged from the life insurance industry in the late 80s financial planners have been remunerated by various fee models.

1) Commissions – this is where financial planners get paid by the product provider for placing the clients into the investment or insurance product. This is typically a percentage of the sum invested or the premium paid.
2) A percentage of funds under management (FUM) or funds under advice (FUA). This is where a percentage fee is charged based on the level of assets the financial planner managed or advised on for the clients.
3) Hourly rates – a small number of financial planners charge hourly rates and these planners typically have come from an accounting background where time based billing is the norm.

The models of charging listed above all have their limitations and so more and more financial planning firms are now charging a flat fixed fee amount.

Under the flat fixed fee amount model clients are charged a fee for the services that are provided initially and on an ongoing basis if required. It would be very unusual in today’s marketplace for a financial planning firm to be able to tell you what the fee for service will be without first undertaking a discovery process.

The point of this is to discover what it is you are trying to achieve, where you are now, where you want to go and how you can get there. This enables the firm to get a clear understanding of if and how they can help you through the services offered. Everyone has unique circumstances and what is more important to one person may be of less importance to another, one set of circumstances may be much more complex than the next. One may require a comprehensive service package and others a more limited advice scenario.

The first discovery meeting is typically at the firm’s expense, this meeting is usually complimentary although we are starting to see some firms charge for this meeting. Typically at the second meeting you will be presented with the terms of engagement (sometimes more meetings are required depending on complexities) at which time you make a decision as to whether you wish to engage the firm to provide the services.

Fees are important but the value you receive for these fees is more so. The value is apparent or it is not – if you do not value the services being offered for the price then you do not engage.

Good financial planners will continually look for ways to add value above and beyond the fees charged.

Should you wish to arrange a complimentary discovery meeting where we will explore what it is that you want and how we can help please contact Eqeus on (02) 9210 7200.


John Hollyman

John’s clients say it is his attention to their story, his ability to lead their journey to discovering wealth and his fundamental desire to get things done that sets him apart from others in his field, while his peers quote trustworthiness, clear strategic thinking and thoroughness that goes above and beyond expectations.

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