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Use this mega guide on the basics of financial planning to learn how to find a planner, ensure you’re getting value for your money and decide if engaging a financial planner is right for you.
Financial planners are qualified to give you personal financial advice and can actively manage your investment portfolio(s) to create wealth and safeguard against loss.
By analysing your personal and financial circumstances, as well as your life goals, a financial planner creates an investment plan to give you the lifestyle you want now and in the future.
Financial planners are not just for the rich; everyday Australians also use financial advisory services. Of course, your goals must be realistic. Financial planners are not magicians.
Personal advice. Financial planners can provide you with personal financial advice. Personal financial advice can be for a single issue, or for more comprehensive or ongoing issues. Your financial planner will charge you a fee based on the type of advice.
General advice. General financial advice is available on websites such as finder.com.au and is free of charge. General financial advice does not consider your personal financial circumstances.
Creates an investment plan to help you realise your goals
Helps you invest your money
Optimises your current investment portfolio
Recommends and helps you apply for financial products such as insurance
Provides budgeting and debt consolidation advice
Pocket Money podcast: What does a financial adviser actually do?
What fees to do financial planners charge?
Financial planners charge a combination of upfront and ongoing fees, which are usually based on the financial planner’s level of service and the scope of work completed.
Your first meeting with a financial planner should be free of charge. Financial planners use this opportunity to find out more about you as a person, discuss how they can help you and outline the fees for their service.
Some of these fees can be claimed as a tax deduction.
Financial planning fees and charges
Fee
Description
State of Advice (SOA) fee
What? This is a fee for preparing the financial advice, strategies and recommended financial products that the financial planner will provide as part of their service. The SOA fee covers the cost of data collection and preparing your financial plan but not the implementation of the financial planner’s advice. Once you agree to have the financial planner collect your financial data, you have to pay the SOA fee.
How much? The SOA fee is based on the scope of the financial planner’s work. It can cost as little as $200 or as much as $10,000.
When? The SOA fee can be charged upfront, deducted from the balance of your investments or added to ongoing advice fees.
Is this fee ongoing? No, you pay this fee once and upfront
SOA implementation fees
What? Your financial planner may charge you additional fees for acting on the financial advice they provide. This can include fees for opening accounts and purchasing investments.
How much? Implementation fees can be a percentage of the value of assets under management by the financial planner.
When? Once you sign an Authority to Proceed (ATP) the financial planner will act upon the advice presented in the SOA. You may be required to pay fees over the next days, weeks or months as the financial planner implements your financial plan.
Is this fee ongoing? No, you pay this fee once and upfront
Portfolio review and revisions
What? Your financial planner must continue to review your portfolio to ensure it remains relevant to your financial goals. There are different ways to arrange the billing of ongoing advice such as pay-by-the-hour or service agreements. You may also incur investment revision costs if your financial planner needs to make adjustments to your portfolio.
How much? Pay-by-the-hour fees can be as much as $350 per hour. Depending on the scope of advice, a service agreement can cost anywhere from $1,000 to $5,000.
When? Charged at cost. You should expect to have multiple meetings with your financial planner every year.
Is this fee ongoing? Yes
Annual Fee Disclosure Statement (FDS)
What? This is a fee for preparing your FDS. The FDS outlines any financial advisory fees you’ve paid in the preceding 12 months and includes information about the services the financial planner should have provided, the services you actually received and all the fees you’ve paid for theses services.
When? This fee is paid every 12 months you are using a financial planner.
Is this fee ongoing? Yes
Two important points about financial planning charges
Know how much you will pay. Make sure you get your financial planning fees expressed as a dollar sum rather than a percentage whenever possible. This will help you avoid any surprises when your financial planner sends you your bill.
SOA fee and insurance. Your financial planner may receive a commission if an insurance product is included in your SOA. Be sure to ask if there are any arrangements like this in place and whether you’ll eligible for a discount on the SOA fee.
Claiming financial planning fees as a tax deduction
Somewhat of a grey area, the fees you pay to your financial planner can only be claimed as a tax deduction if the charge is for the management of an investment that pays an assessable income.
Tax deductible financial planning fees
Non-tax deductible financial planning fees
Ongoing fees. A financial planner’s ongoing fees can be claimed as a tax deduction if the costs are associated with the maintenance of your investment portfolio. For example, quarterly or bi-annual meetings to review your investments.
One-off fees. Fees to attend seminars or courses specifically related to elements of your investment portfolio that generate an income are tax deductible. For example, you can claim the cost of attending an investment property seminar if you own one or more investment properties.
The SOA fee. Any costs incurred in the beginning stages of your relationship with your financial planner can not be claimed as a tax deduction.
Some advice fees. If you’re using a financial planner to get advice about cash flow management and budgeting, the meeting costs can not be claimed as a tax deduction.
Financial planner accreditation and regulation
Certified financial planners
Financial planners can be either qualified or certified and both qualified and certified financial planners are represented by the Financial Planning Association of Australia (FPA).
A qualified financial planner has completed the Australian Securities and Investment Commission (ASIC) RG 146 licensing course to obtain an Australian Financial Services Licence (AFSL). This can be completed online in under a couple of weeks.
A certified financial planner has gone a step further and completed education and training modules. FPA Certification is harder to get than an AFSL and certification is internationally recognised.
Did you know?
The Future of Financial Advice reforms (FOFA: July 2016) state that accountants must obtain an Australian Financial Services Licence (AFSL) to give financial advice about self-managed super funds (SMSFs).
What qualifications does a financial planner need?
As a minimum, financial planners need an AFSL and need to meet the minimum training standards set out by ASIC under Regulatory Guideline 146.
This ensures your financial planner has a level of both general knowledge and specialist knowledge in areas such as superannuation, insurance and managed investments. Although a university degree isn’t necessary to start giving financial advice, you should look for a financial planner who also has a diploma, advanced diploma or degree in a related field such as accounting, finance, economics or, ideally, financially planning.
Full and limited AFSLs
Holders of a limited AFSL can give financial advice on SMSFs and superannuation as well as provide product advice on superannuation products, securities, general insurance, life risk insurance and basic deposit products. Full AFSL holders have no restrictions on the scope of advice they can offer.
How are financial planners regulated?
Financial planning is regulated by industry bodies such as the FPA and ASIC.
The financial planners register
The ASIC MoneySmart website has a register of financial planners. False or misleading entries on the register can lead to fines of almost $80,000 and possible jail sentences. The register works with the public. If you find a financial planner who is not listed on the register, you’re encouraged to report to the planner to ASIC so the watchdog can take the appropriate action.
Industry bodies
Financial planning professional bodies such as the FPA also regulate members through codes of conduct and client review services. You can read more about this below.
How do I choose a financial planner?
Banks, financial institutions, law firms, advisory businesses and independent operators can all offer professional financial advice. Here are some options.
The Financial Planning Association of Australia (FPA). FPA's Find a Planner service lets you search for certified financial planners in your area. Top level members of the FPA are certified professionals with years of experience and professional qualifications.
Adviser Ratings.Adviser Ratings is an independent service where all registered financial advisers in Australia can be found. You can use the tool to check up on client testimonials for prospective financial planners, and filter your search by a range of factors including location, gender and years of experience.
Check the financial planners register
You can use the ASIC financial planner register to double check a prospective planner’s qualifications, experience and work history.
The financial planners register gives you information on:
The financial planner’s areas of expertise
Their industry body membership
Their AFSL
Whether the planner has had complaints or received disciplinary action in the past
Get a copy of the financial planner’s Financial Services Guide (FSG)
Once you have a short list of financial planners, you can investigate the services offered by each by requesting a copy of the planner’s FSG. This guide outlines fees, services and whether the planner gets paid commissions or is associated with any financial institutions such as banks.
Have a face-to-face meeting
When you’re ready for a meeting, you can usually get a consultation free of charge. You can use this opportunity to review the planner’s FSG and to discuss the scope of planning and advice services.
Questions to ask your financial planner
Questions your financial planner should ask you
What are your qualifications?
What is your AFSL number?
What areas are you qualified to give advice in?
Do you have referral arrangements with any product providers?
What’s your work experience and who are some of your other clients?
Are you a member of any professional bodies?
How do you invest your money?
Do you charge a flat fee for ongoing service?
The size of your family and whether you have dependent children
Your plan for caring for your family if you pass away
Your expected education costs for your children
Your plans for investing in property
Your plans for your home as you age
When you plan to cut back on work and eventually retire
If holidays and travel is a plan for before or during retirement
Inheritance for your children
Financial planning and debt consolidation
A financial planner is qualified to provide advice about debt consolidation and they can help if debt consolidation is part of your overall investment strategy. A financial planner can recommend strategies and financial products for debt consolidation such as debt consolidation loans and credit cards.
This type of financial advice can be included in a financial planner’s ongoing fees or in service costs and you can assess the value of this advice when your financial planner gives you your FDS. If you’ve been unable to pay down debt and you’ve been charged for the financial advice, you may want to consider the ongoing value of this advice.
In many cases, general financial advice can provide some good tips on how to consolidate debt. A financial counsellor can also provide debt consolidation advice.
Financial planning can help you realise your goals and the changing nature of the markets and your personal circumstances can make an ongoing relationship with a financial planner essential to get the greatest benefit.
You can assess the value of your financial planner when you’re issued with your FDS. This document lists the services provided and how much you paid for the work completed. For example, if you’re paying for regular advice, find out what the financial planner considers to be regular contact. Similarly, if you’re paying for advice that can be tangibly measured, such as debt consolidation advice, you can make an assessment of the worth of this service when it’s time for your annual review.
While financial planners can help you navigate the world of financial markets, this information is becoming increasingly accessible to the public. There are even robo advice services that act as a halfway point between doing it yourself and using a financial planner.
Robo advice
You can now get the benefits of a financial planner without the high fees. Robo advice platforms such as Six Park and Macquarie Bank Owners Advisory give you professional investment advice for a cheaper price than a financial planning service.
Robo advice services provide investment advice based on your risk appetite. These services can help you invest in a diversified portfolio to help realise gains over three, five and twenty years.
The main difference is the scope of service. A financial planner is qualified to provide advice on financial products such as insurance as well as cash and derivative assets such as ETFs. A financial planner should manage your investment portfolio on an active basis too. Robo advice is a passive form of management, and some services don’t manage your money at all.
That being said, robo advice is a viable alternative to financial planning services for DIY investors and SMSF trusts.
Did you have these questions about financial planners?
Q. Is there a difference between a financial planner and a financial advisor?
A. No. Financial planners and financial advisors are the same thing. A certified financial planner (CFP) meets education, work experience and ongoing training requirements and adheres to a code of conduct.
Q. Should I use a financial planner not listed on the ASIC financial planners register?
A. No. Every professional listed on the financial planners register holds an AFS licence. This is a key requirement for financial planners.
Q. How do I lodge a complaint against a financial planner?
A. The first step is always to try and talk with the financial planner. If the problem can’t be resolved face-to-face, the planner should have a dispute resolution process. This information will be provided in the FSG. Financial planners have up to 45 days to respond to your dispute, though you should get a response much quicker than this. The next step is to use an external dispute resolution service. Ask the financial planner which external scheme you should report to, or make a complaint with the financial planner’s professional association.
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