Fee Based Financial Planning

What is the fee for service financial planning?

Fee for service financial planning is where the customer has paid its financial adviser, a fixed amount for services and advice they provide. Just as you pay your mechanic to service your car.

Currently in Australia there are two main ways that financial planners are paid commissions and fees for service:

1. Commissions - is the most common form of compensation for financial planners in Australia. This is where the suppliers or financial institutions pay financial advisers a commission when their client invests or product purchases or investment. There are generally two types of commissions that are paid:
   - Commissions Upfront is an amount greater than the lump sum paid when the financial advisor or investment product is first introduced. The lump sum varies according to the arrangement with the supplier, but is generally about 4%
   - Monitoring Committees, a small standing committee that is paid to financial planners generally on a monthly basis for the life of the investment or as long as the customer keeps the product or the provider of advice they were transferred to another financial planner. trailing commissions average about 0.8% per year.
2. Fee for service - it is a less common form of remuneration for financial advisers, where instead of receiving payment provider's product, the customer pays directly for their financial planner for their time and advice. Often, there will be a fixed amount or based on an hourly rate and / or packaged in feature where you can choose to pay for specific services, such as a full statement of advice or the establishment of self managed super fund .

What style of financial planning to pay is the best? Commission vs. fee for service?

There has been much debate in the media whose style is best offer compensation to clients. The overwhelming majority of financial advisers in Australia are always Commission based, but our view is that compensation for financial planning services is better for customers because it reduces the risk of a conflict of interest. When a financial adviser is paid by a supplier of products, we believe that they are willing to work for the Commission rather than working for the client. This may lead to customers being "sold" products that may not be the best option 100% of their needs. Suppose that your financial planner has 2 options of where you should invest. One is better for you than another, but any alternative happens to pay the adviser a larger commission. You can see where the conflict of the Commission based financial planners arises.

In addition to the problem where most financial advisers in Australia does not give advice in areas such as budgeting, savings and tax structuring because they do not put their customers in a product, they are not paid. Many people need the advice of a professional financial basis and do not get it for that reason.

In the financial spectrum , we believe that the remuneration of financial planning services is the way forward. We know we're in the minority of financial planners in Australia, but we believe this payment structure offers the best service to our customers and allows us to advise our clients in all areas of financial advice. At the end of the day, it is our customers who pay us for our services and advice, and it is our client that we work for.