Fee For Service Financial Planning

What is fee for service financial planning?
Fee for service financial planning is where a client pays their financial adviser a fixed fee for the services and advice they provide.  Many like you should pay your mechanic to service your car.
Currently in Australia there exists 3 primary ways that financial planners are paid Commissions and Fee for Service:

Commissions - this is the highest many common shape of remuneration for financial planners in Australia.  It is where product providers or financial institutions pay financial advisers a commission when their client invests or purchases their product or investment.  There exists generally 3 variations of commission that are paid:- Upfront commissions that is a larger lump sum quantity paid to the about insurance adviser when the product or investment is first set up.  This lump sum quantity varies depending upon the arrangement together with the provider but is generally around 4%- Trail commissions that is a smaller ongoing commission that is paid to the financial planner usually on a monthly basis for the life regarding the investment or as long as the client retains the product or advises the provider that they have transferred to another financial planner.  The average trail commission is around 0.8% per year.
Fee for Service - this is a fewer common shape of remuneration for financial advisers where instead of receiving payment from the product provider, the client pays their financial planner directly for their time and advice.  Many times there shall be a set fee neither based on an hourly rate and/or packaged based where you can decide to pay for specific services for example a full Statement of Advice or setting up of a Self Managed Super Fund.

Which financial planning payment style is better?  Commission vs fee for service?








There was very many of debate within the journalists about which style of remuneration gives is better for clients.  The overwhelming majority of financial advisers in Australia are still commission based but our opinion is that fee for service financial planning is many better for clients as it lessens the risk of a conflict of interest.  When a financial adviser is paid by an things provider we trust that they can be inclined to work for the commission rather than work for the client.  This can result in clients being "sold" into products which shall not necessarily be the 100% greatest choice for their needs.  Speak your financial planner has 3 choices of where to recommend you invest.  One is better for your wants than the other, but the lesser alternative happens to pay the adviser a larger commission.  You can look where the conflict for commission based financial planners arises.
In addition is the challenge where most financial advisers in Australia do not release advice in regions for example budgeting, savings, and tax structuring as due to the fact that they aren't placing their client into an things they do not get paid.  Many people need this grassroots financial advice from a professional and aren't getting it for this reason.
At Financial Spectrum, we trust that fee for service financial planning is the method forward.  We have knowledge of that we are within the minority of financial planners in Australia but we trust that this payment structure offers the greatest service to our clients and enables us to release advice to our clients in all regions of financial advice.  At the end regarding the day, it is our clients who pay us for our service and advice, and it is our client that we are working for.