With higher advice fees causing a jump in the sale price of advice firms, a panel has argued charging accordingly is a top priority, but Peloton Partners has said firms are reluctant to increase fees.
Last week, Money Management covered how Radar Results has increased its price guide for advice firms with investment and superannuation clients from a minimum of less than $2,000 to less than $3,000.
But even $3,000 is a low ballpark as the most in-demand businesses are those with clients who are paying fees between $4,000 to $8,000 per annum with high account balances.
Radar Results founder, John Birt, said: “It used to be that an average advice fee was $1,500, but that’s long gone now. The price of advice has been consistently going up, and now it sits more around $3,000.”
Now a panel of advisers on an Advisely webinar have discussed how they navigate charging a rate that reflects their experience and education, yet also being accessible for clients.
Investment Trends previously discovered advice firms with a profitability of 40 per cent or more were charging upwards of $7,700 per annum. The research house also identified that average ongoing fees charged per client stood at $5,500 per annum in 2024 – a 17 per cent jump from $4,700 in 2023.
Independent adviser, Nathan Fradley, warned advisers can “shoot themselves in the foot” by charging too little for their services.
“You bring someone on, you charge what they can afford because you want to help them, or you need some business, or whatever it might be – you’ve now pegged the value of what you do,” he said.
“If you bring them on at $2,000 and you deliver an excellent service, then they value your services at $2,000. You bring on someone else five years later at $8,000 for exactly the same thing, they’re never going to understand why it’s $8,000 because their price point is not there.”
He believes advice should cost at least $6,500 in order to be a sustainable business and reflect its qualitative and quantitative benefits.
Adding to the discussion, Conrad Francis, founding director of Inspired Money, noted the importance of having processes in place so prices can be assessed and adjusted as needed.
“We’ve got a client value proposition, which we look at probably at least once a year before we do our new budgeting. So, we look at the touch points, the cost of the touch points, and establish a base fee,” Francis said.
“I think that’s what gives us the confidence in our charging and knowing the value in your time. You have to have a policy that allows you to move the pricing accordingly.”
Meanwhile, research by advice consultancy Peloton Partners found most financial advice practices will neglect to increase their advice fees, a trend that has persisted for several years.
Its research of over 10,000 firms found 27 per cent of practices use a percentage of the funds under management (FUM) model, 30 per cent operate a fixed-fee model, and 43 per cent offer a hybrid approach of both fixed and variable fees.
The main instance that would prompt them to change fees would be a period of market or business downturn longer than six months.
“Most advice firms will not alter their pricing models – unless a downturn drags on for more than six months,” it said. “Many firms waited too long to respond – only adjusting once financial pressure became unavoidable.
“The recent dip and rebound in markets is unlikely to prompt major pricing shifts. But if markets remain depressed over a six- to nine-month stretch, history tells us that firms relying on pure per cent of FUM pricing will pivot – typically towards hybrid or fixed-fee models.
“Fixed fee models are more insulating – when they are truly fixed. However, in prolonged market slumps, even those firms often react emotionally by keeping fees static or reducing fees unnecessarily. These moves are not always based on logic or necessity – they are driven by discomfort, perception, or fear.”
