Research from two separate financial advice software providers has found fees have not materially increased over the last year.
Data supplied to Professional Planner by planning software firm Padua Solutions found the total ongoing advice fee was $4805 this financial year, down $5 on average compared to the previous financial year. Total average upfront advice fees increased from $3284 to $3373 – a change of $89.
“It’s safe to say advice fees have stabilised,” Padua Solutions co-founder Matt Esler says.
Research from adviser platform and software service Dash found the average ongoing advice fee on its platform is $3830, which Whelan says is slightly up. The highest fee on the system was $11,363.
“I’d suggest that’s up almost $500 from what I’ve seen historically,” Dash CEO Andrew Whelan says.
Dash’s research found their average upfront fee was $1956.39, which ranged from $53.18 to $5000.
The findings contrast data from Padua last year which found a steep increase in the average ongoing advice fees of 33 per cent, compared to the $3656 figure in FY21.
Despite fees largely stabilising this year, a poll from Adviser Ratings released last year found advice practices anticipated increasing their fees this year.
The same survey found one in 20 Australians were willing to pay $2500-5000 a year for advice, while one –in 10 would pay up to $2500 a year.
While Minister for Financial Services Stephen Jones has had to fight off criticism he is not doing enough to reduce the cost of advice amid a rise in the ASIC levy and the Quality of Advice Review legislative changes not expected until next year, the AR data still noted that the most common price point the majority are willing to pay for advice is only $500 a year.
Share of the pie
The exodus of advisers since the Hayne royal commission has led to the supply of advice being outweighed by demand.
The Adviser Ratings ‘Landscape Report’ in April found one-third of practices were willing to take on more clients, but at the expense of less profitable ones.
However, whether average fees have gone up because lower balance clients have dropped off is a matter of debate.
“They definitely have because just generally speaking the advisers are shedding clients of a lower value because they can’t afford to do it and they’ve been doing that constantly over the last six or seven years,” Whelan says.
However, based on the numbers Padua has access too, Esler believes this isn’t the case.
“The reason being is if lower balance clients will be dropped off in this huge wave that has been suggested you would see a reduction in the percentage [of advice fees in Funds Under Advice], but the percentages have largely remained consistent,” Esler says.
The percentage of FUA for ongoing advice fees in FY23 was 1.29 per cent, slightly higher than the 1.20 per cent figure from FY22.
“Because the percentage is going up, it actually means advisers haven’t targeted higher balance clients,” Esler says.
“This data contradicts what people are saying in the market where – and I’ve never agreed with that anyway – that advisers are going to start dropping off their lower balance clients. That’s just not the way advisers operate.”
For Dash, Whelan says as a percentage of funds under advice, the average is about 0.92 ongoing while the highest is 2 per cent.
Tactics, mate
When it came to strategies being recommended via their respective systems, the top three on Padua’s system were rolling over a client’s super platform, retaining the super platform, and retaining the pension platform.
The top three strategies Dash saw most utilised were optimising the best super contribution strategy and appropriateness of transition to retirement, surplus income allocation analysis (debt repayment versus super contributions), and insurance needs analysis (advanced tax calculators and annuity income).
“Advisers are still recommending a broad range of strategies, what we’ve identified is there is 650-plus strategies in the market with about 2000 or so variations on those 650 strategies,” Padua’s Esler says.
“Advisers are recommending a much lower number than that. It means what advisers need is technical support.”
When recommending a strategy to a client, Esler notes the importance of knowing how to implement the strategy for that client which has been handicapped via the loss of experienced advisers.
“Because we’ve seen a lot of the experienced advisers leave the market and obviously the growth in [adviser] numbers from this point is going to be filled by younger, less experienced people entering the market,” Esler says.
“What needs to happen is you need to have greater technical support with people who know the strategies and how to implement those strategies mentoring these young advisers coming through. More so, it’s going to be the role of technology in bridging the technical gap and bridging the research gap.”