Consumers fail to recognise cost of advice

New research has confirmed most Australian consumers are not prepared to pay big dollars for financial advice, with most believing it should cost just $300 upfront.

That is the bottom line of new research released by Investment Trends this week, which found that the average Australian adult believed the $300 figure was appropriate.

The research was contained in the Investment Trends 2010 Planner Business Model report, which drew on a survey of investors conducted in December last year and a survey of financial planners completed this month.

According to Investment Trends analyst Recep Peker, the preliminary results revealed that, on average, investors believed financial advice should cost $300 for the first visit and $300 for subsequent visits.

“Yet the average financial planner estimates that the break-even cost of providing full advice was $2,700 and providing simple advice was $1,200,” he said.

The research found that, similarly, planners estimated that, on average, the cost of maintaining a client file, including periodic reviews, was $1,400 a year.

Commenting on the results, Peker said it had revealed a striking disconnect between the expectations of planners and their clients.

“It also suggests that many investors may be unaware of the true cost of advice under existing asset-based fee models,” he said.

However, the research also revealed that while consumers might baulk at paying more than $300 for their first visit to a planner, they were typically willing to pay more to have their strategies reviewed.

“Generally, investors seem willing to pay more once they have had firsthand experience with financial planners,” Peker said.