Noel Whittaker
Noel Whittaker

Why am I paying for a Statement of Advice?

SINCE the banning of commission, advisers are required to charge a fee for service.  On the face of it, it's a better system as it is transparent and in many cases the fee may be tax deductible.

Unfortunately, human nature being what it is, few consumers have objections to fees that are automatically deducted, however they have a totally different attitude when they have to pay the money from their own pocket as a separate item.

Unfortunately due to the mire of regulations that have been foisted on the financial industry by well meaning bureaucrats, who are more concerned with ticking boxes than offering real solutions, a financial adviser is now required to hand a potential client a Statement of Advice which may be over 100 pages.  The cost to produce this is usually between $2000 and $3000.

It's ironic that a person who wouldn't blink at an $8000 commission included in a $200,000 investment is often reluctant to pay less than half this for a Statement of Advice, if it requires having to write a cheque.

A change of thinking is urgently required.  Good financial advice doesn't cost, it saves.

Recently Vanguard Investments, one of the world's largest investment management companies, completed research about the benefits of consulting a good financial adviser.  Their conclusion was that good advice may well add up to 3% per annum in enhanced portfolio returns.

When paying for professional financial advice, you may be asked to pay in a variety of forms.  Some advisers will charge a flat fee based on the level of work or complexity of your situation, a percentage of the assets you have asked for advice on, or an hourly rate and bill you accordingly.

How much you pay depends on the individual adviser, however you should expect that the preparation of a Statement of Advice will cost somewhere between $770 and $11,000, or possibly more.  The upper end of this should relate to complex advice that involves detailed tax structures such as trusts and companies.  If you pay an hourly rate, expect it to be somewhere between $220 and $550 per hour.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: