So you are thinking about getting some financial advice to either assist with your retirement planning or just ensure your finances are as healthy as they can be. Before you go out and get financial advice you probably want to know “How Much Does Financial Planning Cost?”.
In July 2015, investment commissions were abolished. This significant change was due to the potential conflict that existed for advisers ‘to sell’ products with commissions and in the years leading up to the change it was shown time and again, that the allure of investment commissions led to outcomes that were detrimental for consumers of financial advice.
The Future of Financial Advice reform or FOFA as its known, came about after several advisers and practices were implicated, which brought home to everybody the importance of this change.
Two and a half years since the introduction of FOFA and it still feels like early days, in what is seismic change for the industry. It is a complete reshaping of the financial advice landscape and the worst affected are the country’s biggest players, like the banks. Some of which have already signaled they are going to get out of the financial planning space altogether.
Some firms, like Yield, recognised the conflict of investment commissions early and adopted a fee for advice approach to ensure they could consistently provide advice that is in their client’s best interest. Advice that is completely focused on their client’s personal values and goals and not conflicted by the need to sell a product to get paid. Yield have been doing this since our inception in 2006.
What Type of Advice are you Looking For?
Just like most services what you can expect to pay is largely based on the service you are looking to get in return. Here at Yield Financial Planning we have two broad categories, ‘Scoped advice’ and ‘Full financial planning services’ and depending on what you are after, will impact the investment you make into the advice.
It’s important to keep in mind, that whether your need is scoped or a more holistic financial plan, there are three phases of work that goes into what you pay.
- Discovery – this is the vitally important step of getting to know you and develop an understanding that is deep enough to be able to provide highly personalised advice. After getting to know you through meetings and analysis of questionnaires, we research your existing structures, products and tax position.
- Plan preparation – Creating ‘the framework’ for how we approach your financial plan, is followed by the plan writing, cashflow modelling and where applicable research of the market to identify what products are best suited to your specific needs for achieving your objectives.
- Implementation – Support in implementing the strategies is an essential step towards realising the benefits of the advice
Scoped Advice means we can address a specific need that you have prioritised as important now, like protecting your income with insurance, investing some money or superannuation advice as some examples.
How Much Does Scoped Advice Cost?
How much you pay for scoped advice, is very dependent on what advice you need. The more defined or ‘scoped’ the advice is, the lower the cost typically, because the time and IP that goes into the advice is less. At Yield we have developed a calculator that will quote any advice we can provide with great accuracy.
As a guide, scoped advice is usually between $500 – $2,000 but it will always depend on what you need and how defined your scope is.
It is still possible to get financial planning advice for your personal insurance needs, where there is no cost to you. Insurance, like mortgages, have built in commissions that mean the price you pay for the policy an adviser can advise you on, is no different to going to the insurer directly. For this reason, most advisers do not charge a fee for insurance advice.
On 1st January 2018, insurance commissions paid to advisers upfront were lowered and 1st January 2019 they will be lowered again. This is a legislative enforcement designed to discourage advisers from regularly recommending a change to insurers or ‘churning’ as the practice is known. This change will have little impact on Yield, as we have typically favored a commission structure similar to what will be the norm in future anyway, because we advise with the long term in mind and therefore have very little ‘churn’ in our client base.
Full Financial Planning
Full Financial Planning means we will work with you to define and chart a full financial plan to help you achieve your retirement goals and important priorities in between now and then.
How much a Financial Plan costs varies depending on complexity. Factors that cause the differential include how many structures you have or may benefit from. For example if you have an SMSF, Family Trust, Company and have needs as individuals, then advice is essentially needed to four or even five individual entities, depending if you are single or a couple.
How many investments or products are suitable will all add layers of complexity and time, that will influence price.
To develop a full retirement plan for example, usually requires repositioning your assets to generate income. A reshuffling of the decks that will typically result in a lot of strategies and advice that have financial benefits that can be quantified and explained to help you see benefits well in excess of your financial outlay for the advice.
In addition to this, a retirement plan is looking at how your money will last for your entire life, so development of comprehensive cashflow modelling to give you this insight is essential, including layering in how government benefits might be part of the picture for your retirement. All of which is essential to creating a plan that will give you genuine peace of mind that you are financially equipped to retire.
Preparing a full financial plan requires a personalised pricing, but it is fair to say that you should expect to pay in excess of $3,500 for a quality ‘bespoke’ financial plan.
The most important thing is to ensure that you get value out of the service. That value may be the fact that through working with a financial planner you are able to retire 5 years earlier and you reduce or relieve your financial stress.
For many people we meet who are wondering when they can retire, we show them they can do it sooner than they would have otherwise. This is usually a combination of tangible strategies to demonstrate how to use money effectively but also just the peace of mind doing comprehensive modelling and analysis can give to knowing the position they are actually in.