Financial advice charged on an upfront or hourly fee basis will cost consumers less than the use of ongoing asset-based fees, new industry research has shown.
The study was conducted by Rice Warner Actuaries on behalf of the Industry Super Network and used five different advice scenarios to compare the two methods of remuneration.
According to the research, consumers would pay anywhere between two and 17 times less when charged an upfront fee for the advice they received.
"The report demonstrates ongoing fees are typically the most expensive way to pay for financial advice. The report shows that, as proposed in the government's Future of Financial Advice reforms, one-off and transparent charging for financial advice will reduce costs to consumers," Industry Super Network chief executive David Whiteley said.
"This will consequently increase the capacity for ordinary Australians to access financial advice, whether from financial planners, accountants or super funds."
One specific scenario the report dealt with was a transition-to-retirement strategy. Under the circumstances presented, the research found a client would save $80,000 in costs if charged on an hourly rate basis as opposed to an ongoing asset-based fee.
"Ongoing fees are a very expensive way to pay for financial advice and this is shutting out the four out of five consumers who do not seek professional advice. The government's reforms will ensure advice fees are transparent," Whiteley said.
"The opt-in measure will ensure that consumers are not paying for advice that they do not receive and this will make advice a lot more affordable and accessible for ordinary Australians."
