Australian financial advisers have increased their fees by 7 per cent over the past year, with the median client now paying $3960. Over the past five years, the median fee has risen by 58%. Despite efficiency gains, this pattern is expected to continue through 2024, driven by inflation and rising interest rates which have elevated advisers' costs, according to our 2024 Australian Advice Landscape Report.
The majority of Australian consumers reported being worse off or in the same financial position as they were 12 months ago. Currently, 60% of respondents indicate they are living paycheque to paycheque, a level as high as during the challenging times of the COVID-19 pandemic, due to rising costs of living. As mortgage repayments increase alongside rising interest rates, a whopping 43% of these individuals reported they did not feel they had sufficient savings for an emergency fund.
This financial pressure has a dual effect. It heightens consumer awareness of the need for advice while simultaneously reducing their ability to afford it. The figure below compares consumers' capacity to pay for advice from the height of the pandemic in 2021 to the present day.
One in four unadvised consumers are considering seeking financial advice, which equates to approximately 2.3 million Australians. However, most are not willing to pay the current fees for such services. Consumers, on average, are willing to pay $911 for financial advice. This amount drops to $553 among those who do not currently have a financial adviser, down from $651 in 2022. The issue is that only 6% of advisers offer fees below $1500 for new clients.
Surge in Demand for Advice
As Aussies grappled with high inflation, rising interest rates, and changes to super rules, the demand for financial advice surged significantly as evidenced by increased enquiries to financial advisers. In 2023, leads through the Adviser Ratings website and its affiliated white label sites rose by 36% compared to the previous year.
The primary areas where consumers sought help were building superannuation (45%) and planning for retirement (39%). Recent changes, such as the removal of the work test for voluntary contributions by individuals under 75 years from July 2022, and the proposed new tax framework for super account balances over $3 million, may be further driving the strong demand for advice in these areas.
Trending: Marked Increase in Consumers Seeking ESG
The proportion of consumers considering environmental, social, and governance (ESG) factors in their decision-making has risen significantly, from 39% last year to 54% this year. This increase comes despite major investing organisations facing accusations of not fully adhering to their ESG commitments.
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Comments8
"Sean makes a good point in his comment. I too have had to cease my adviser relationship with many lower paying clients due to he increased government imposed red-tape. Ergo, my fees haven't increased, but my average fee has."
Chris 19:16 on 10 Jul 24
"Thanks Andrew - no, the median ongoing doesn't include commissions charged for insurance."
Adviser Ratings 17:38 on 10 Jul 24
"Thanks Paul, you can see a more detailed breakdown of these results in Chapter 1 of the Landscape Report: https://hubs.ly/Q02DwJrJ0"
Adviser Ratings 17:36 on 10 Jul 24
"Does the median fee include the commission that is charged for insurance?"
Andrew 17:15 on 10 Jul 24
"Could you please add some more relevant details to the descriptions of the results. Without knowing the questions specifically asked or the demographics (at least) there is little to take from these surveys. Please provide more information when drawing the conclusions you have..."
Paul Moran 16:22 on 10 Jul 24
"Fees are what you pay.... however the willingness to pay is directly attached to the value that you deliver. Most uninformed clients think that this is performance, and advisers who sell on performance will never be of value and lose clients both those able to pay and those that are not. Advisers who provide a service that the client values - education / choices/ goal generation / time saved dealing with super funds or government departments ect- those are the ones who can really get paid for their services and earn a decent income. And those clients will be sticky and referring to the adviser again and again."
Ronald 16:15 on 10 Jul 24
"The fees are directly related to value, specifically, "perceived value". It starts with the Google check before the client engages with the adviser. Generally speaking, advisers with decent qualifications are more likely to be perceived as being higher-value. "
Michelle 16:07 on 10 Jul 24
"Statistically, sure, average or median fees have increased, but only because advisers can no longer afford to retain lower end clients. My existing clients are not paying any more than they did 5 years ago- % based FUM increases aside- but my overall client base has shrunk - having released all the lower-end, increasingly unprofitable clients. "
Sean 15:59 on 10 Jul 24