How Financial Advice Fees Work (and Why Incentives Matter)
This article explains, at a general educational level, how different financial advice fee models can shape incentives.
It is not personal advice and does not assess whether any model is appropriate for you.
Important: This article is for educational and informational purposes only. It is not
financial product advice or personal financial advice. SuperCalc Pro does not hold an Australian
Financial Services Licence (AFSL) and cannot tell you which products, fee structures, strategies or
advisers are right for you. Always seek advice from a licensed financial adviser who can consider
your objectives, financial situation and needs.
In Australia, licensed financial advisers can be paid in a number of different ways. Each fee model has
its own advantages and trade-offs, and each can create different incentives. Understanding these
structures at a high level can help you have more informed conversations with an adviser, but it
cannot replace personal advice or your own legal and compliance obligations.
Common financial advice fee models
This overview focuses on several fee approaches often seen in retirement planning advice. Not every
adviser uses these models, and individual arrangements can be quite different in practice.
Assets under management (AUM) fees. Under this model, an adviser or licensee charges a
percentage of the money they manage for you " for example, a fee calculated as a percentage of your
portfolio value. If your balance grows, the dollar amount of the fee generally grows as well. This can
provide an incentive for the adviser to focus on long-term portfolio growth, but it also means their
revenue is linked to the size of the assets they manage.
Flat or fixed fees. Some practices charge a flat annual fee for a defined scope of
services " for example, a yearly review and ongoing support. The amount may not change directly with
your portfolio balance, which can make costs more predictable. However, it may also mean the adviser
needs to clearly define what is and is not included in the service to avoid scope creep.
Hourly or project-based fees. Under an hourly or project model, an adviser or planner
charges for their time in a similar way to other professionals. This can make it easier to see exactly
what you are paying for, but it also means total cost depends on how complex your situation is and how
much work is required.
Hybrid arrangements. In practice, many advice businesses use a combination of models "
for example, a flat fee for an initial statement of advice plus an ongoing percentage-based fee for
managing investments. The important point is not that any one approach is "good" or "bad", but that
each works differently and may create different incentives.
Why incentives and structures matter
Every commercial relationship has incentives. In financial advice, those incentives can influence how
much time is spent on different clients, how services are packaged, and how recommendations are framed.
That does not mean an adviser is acting in bad faith; licensed advisers in Australia are subject to
best-interest duties and other regulatory obligations. Rather, it means the structure is worth
understanding so you can ask clear questions.
For example, an advice business that charges percentage-based fees may find it easier to keep track of
ongoing clients with larger balances, while a flat-fee business might focus on delivering a clearly
defined service to each client regardless of portfolio size. Neither approach is automatically
"better"; they simply emphasise different things. Your task, usually in partnership with a licensed
adviser, is to work out which arrangement is suitable for you and is consistent with the formal
disclosure documents they provide.
A purely hypothetical illustration of fee mechanics
The table below is a simplified, purely illustrative example. It is not based on your situation and is
not a recommendation. The numbers are rounded to make the concept easier to see.
Suppose a portfolio of $1 million is subject to an ongoing fee of 1% per year, and different spending
choices are considered. Ignoring market movements, tax and all the real-world complexity, the annual fee
in dollar terms would change as the balance changes:
| Illustrative portfolio balance | Illustrative annual spending | Illustrative 1% fee |
|---|
| $1,000,000 | $35,000 | $10,000 |
| $950,000 | $45,000 | $9,500 |
| $900,000 | $55,000 | $9,000 |
Again, this is an extremely simplified picture. In reality, investment returns, tax, advice regulations,
and your personal goals all matter. The point of the example is simply to show that when fees are
calculated as a percentage of assets, both clients and advisers may pay attention to how the balance
changes over time.
1% adviser fee on $1M = $10K/year. Model YOUR retirement income WITH and WITHOUT ongoing fees to see the long-term impact.
Calculate fee impact →
Different products and advice considerations
Retirement income strategies in Australia can involve a mix of account-based pensions, annuities,
superannuation in accumulation phase, and other assets. Whether any of these is appropriate for you is a
matter for licensed advice and the formal Statements of Advice (SOAs) and Product Disclosure Statements
(PDSs) you receive.
From an incentive perspective, some fee models naturally link a practice"s revenue to the amount of
assets it manages directly. Other models are more closely linked to the amount of work performed or the
scope of the service. That does not, by itself, tell you whether a recommendation is in your best
interests " that assessment depends on the adviser"s legal obligations and on how carefully they have
considered your situation.
A neutral example of disclosure
Many Australian advice documents include sections explaining "How we are paid" and "Benefits we may
receive". These sections are designed to help clients understand the fee arrangement, including any
ongoing percentage-based fees, flat fees, or insurance commissions that may apply. Reading these
sections carefully, and asking the adviser to explain anything that is unclear, is one way some
people choose to understand the commercial side of the relationship before deciding whether to
proceed.
Types of questions some people consider
People preparing for a meeting with a licensed financial adviser sometimes find it useful to think about
open-ended, neutral questions. The aim is not to challenge the adviser, but to understand how the
service works. Examples might include:
- "Can you walk me through how your fees are calculated, and how they might change over time?"
- "If my circumstances change and I need to adjust my strategy, how would that affect your fees?"
- "Do you use different fee models for different types of work, such as initial advice versus ongoing reviews?"
- "How do you make sure your recommendations stay aligned with my best interests under the current regulations?"
None of these questions is mandatory or exhaustive. The right questions for you will depend on your
situation, and a licensed adviser can help you frame them in a way that makes sense for your goals.
Alternative fee structures in context
Some advice businesses in Australia have moved towards flat fees, hourly fees or hybrid models in
response to regulatory change and client preferences. Others continue to use percentage-based ongoing
fees where that structure is disclosed and agreed. Each approach involves trade-offs in terms of
predictability, perceived fairness, and business sustainability.
Regulatory guidance from ASIC and industry bodies continues to evolve. If you are unsure how your
adviser is paid or how conflicts of interest are managed in your specific situation, the most direct
path is usually to read the relevant disclosure documents and ask your adviser to explain anything you
are uncertain about.
Key point: This article does not suggest that any particular adviser, practice, fee
model or product is right or wrong. It simply outlines, in general terms, that different commercial
arrangements can create different incentives, and that understanding those arrangements is part of
being an informed client.
Ongoing 1% fee vs flat-fee advice? Over 30 years, that's $300K+ in fees. Model YOUR retirement with different fee structures.
Compare fee impacts →
Model Retirement Income Without Adviser Fees
See YOUR exact retirement income with 0% fees, 1% ongoing fees, or flat-fee advice. Calculate the 30-year impact on your total wealth.
Calculate Fee Impact
General information only: This article is a general discussion of advice fee models
and incentives in Australia. It does not consider your personal objectives, financial situation or
needs, and it does not recommend any particular product, strategy, adviser or fee structure. SuperCalc
Pro is not licensed to provide financial advice and does not hold an AFSL. Before making any
decision about financial products or strategies, you should read the relevant disclosure documents
and obtain advice from a licensed financial adviser.