How Much Money Should You Have to Hire a Financial Planner (and is it worth it?)

Financial Planning

Everyone who has money (and that is pretty much everyone) can benefit from financial advice at some point in their life. However, many people are left wondering if they could get the same results with a DIY plan; if professional advice is even affordable for them; and what they might get in return for the annual fee they are paying.  

The Answer to Your Question

As a rough guide, if you are earning over $60,000 as an individual, or $120,000 household income, or have superannuation or assets over $100,000, you’ll most likely be able to afford advice and you’ll benefit from seeing a financial planner. This might surprise you! But you should know that financial planning is not just for the wealthy. Your financial success doesn’t only depend on how much money you make, but how much you save and spend.  Deciding if professional advice is a good idea for you comes down to whether it is affordable to you or will add value to your situation.

In this article, I go into detail about:

  • Why we look at value, not just assets
  • Situations when you might not be ready
  • Times when you should start seeking advice
  • The process and cost of hiring a financial adviser
  • Is a financial advisor worth it?

 

The Value of Advice

I mentioned ‘adding value’ earlier; this means that a good advisor must evaluate if the value they provide outweighs how much the advice costs you (keeping in mind that many financial strategies are long-term in scope). This is important not just because it’s financially wise, but also because your best interests are protected by law.

Given the rough guide provided above, most people will have some cash flow or investments to start with, which your advisor would use to create additional value and build your wealth. You might still be unsure if you have the investable assets or annual income to justify seeing a financial planner or getting help with an investment strategy. First, I recommend just picking up the phone and chatting with an advisor. They will be able to tell you pretty quickly if they can help you. Second, it is always worthwhile doing what you can on your own to build up your personal finances before seeking more comprehensive planning.

family in the kitchen with groceries

So, Are You Ready To Hire A Financial Advisor?

Now that we’ve covered some of the financial advisor costs and the level of assets you might need to get started, it’s time to make it more personal. Before hiring a financial advisor, it’s essential to assess your financial readiness. This can include your liquid assets, your willingness to take advice on financial decisions, and the type of advice you might need.

Only you can know if you’re ready for a financial advisor. Once you’ve considered your financial situation, it’s time to think about if you’re ready to set some clear long and short-term goals. It’s a good idea to hire a financial advisor if you’re ready to discuss all the details of your financial situation with someone and if you’re ready to commit to an ongoing relationship (most financial advisors don’t offer one-off advice). Here are some points I think people should consider when deciding if they are ready (yet) to hire a financial advisor:

❌ You don’t have a lot of money or savings

If you’re just getting started in building your financial literacy or you want to save or invest small amounts of money, it might be too soon for you to hire a financial planner. Read our guide on saving and budgeting, set some personal goals and initiate a forced saving plan to reach them, put money aside into an emergency fund or other bank account, and start investing using apps such as Raiz Invest or Commsec Pocket. Even some robo-advisor tools can be very helpful at this stage, although I’ll always recommend a human advisor as you progress in your journey.

❌ You have significant debt or you’re struggling under financial burdens

If you’re struggling with debts that make it hard to make ends meet, or need to overcome addictive behaviours such as gambling, then we recommend you see a financial counsellor as a first step. You can usually access financial counselling and budget assistance services free of charge or for a greatly reduced fee, without the same ongoing advice commitment expected by a financial advisory.  Speak to a financial counsellor through the National Debt Helpline on 1800 007 007.

❗️You only want one-off advice

If you would like one-time advice on your financial life, a sign-off on paperwork, or a second opinion on your financial decisions, it can be difficult to find a professional who can help you. In Australia, financial planners legally cannot provide specific personalised advice outside of a process that involves meeting with you to assess your situation and putting together a financial plan for you (called a Statement of Advice). However, if you search ‘one-off financial advice’, you will be able to find advisors that offer general advice or answers to broader questions for a one-off fee.

✅ You know it’s time to get a financial plan in place but don’t know where to start

You’re not alone. Many Australians want to devote more time to getting their finances in order and even getting help.  But choosing the right advisor can feel complicated, so it’s easy to procrastinate. The good news is, finding the right advice is not as hard as it seems.
Start by looking at the best financial advisors in Australia and what questions to ask about their services. Researching the top financial planners means that even if you don’t end up going with one of these advisors, you start to build a picture of what to look for in an advisor you can trust.  Calling an advisor or two will give you a lot of information about their pricing structure, their approach to investments, their level of customer service, and if they could help someone in your situation. Expect your financial planner to help you set realistic goals, develop a budget, choose the right investments and provide you with the education and support you need to make sound decisions and achieve your goals.

✅ You’ve built a foundation and want to take it to the next level

If you’re at a stage where you have some assets in your name – perhaps you’ve bought a house, or you’ve been investing and saving personally for a few years, you’re probably in a very good place to take your financial strategy to the next level and start setting your future goals with the help of a financial advisor. That next step could look like planning for retirement, purchasing an investment property, planning for children’s education costs, or just wanting to make sure your family is financially protected. A financial advisor can create confidence to make informed decisions that grow your wealth and secure your future.

✅ You’ve been managing your money alone but now you want help or accountability

Needing help isn’t a bad thing. We see people looking for money management for a variety of reasons. Perhaps they need to have their debt restructured and a strategy in place to pay it off, maybe they have no time to figure out the next steps to reach their goals, and sometimes it’s simply a desire for increased accountability to stick with a plan. There is something very powerful about having an ally working with you towards your life goals or financial goals.

✅ You’re looking for wealth management and a protective or growth strategy

If you are managing a high income, or you’ve built a significant portfolio, it’s very wise to see an experienced financial advisor. Not only can they provide expert counsel on financial decisions and take on a lot of the time-intensive research and paperwork, but they are also indispensable in ensuring your wealth is protected. Financial professionals can help you navigate the complexities of trusts, family offices, legacy-setting and estate planning, philanthropy, or transferring assets. It’s also super important to have professional advice if you’ve suddenly come into money – like an inheritance or insurance payout. In a situation like this, the right advice can transform your financial outcomes.

The Process and Cost of Financial Advice for the Average Client

At My Wealth Solutions, we start the process with a phone call to get to know you, some brief information about your situation, and why you are looking for advice. If we can see that we can help you towards greater financial success, we book you in for your first free consultation with one of our advisors. In order to evaluate your situation and be able to share what we believe will achieve your goals, we will request a brief overview of your current finances, such as income, super and assets. Because we are a fee-for-service advisor, we can provide a fee estimate once we have discussed your personalised recommendations – this happens in that first consultation. If you decide you want to have an ongoing advice partnership, we will review your plan each year to ensure that 1) we are on track to your goals, 2) you still see value in ongoing advice, and 3) we can make any changes to your plan that are needed.

According to a report from Adviser Ratings on the 2023 Australian Financial Advice Landscape, 20% of Australians are willing to spend between $2500 and $5000 on financial advice. Though this varies from client to client, this provides a rough estimate of how much it will cost annually to have financial advisors, like our team, professionally evaluate and handle your financial affairs. Moneysmart.com has an excellent breakdown of the different kinds of fees that advisors might charge.

Est. Minimum Median Est. Maximum
Usual Initial Consultation Fee $0
SOA Preparation or Upfront Fees $800 $2,000 $8,000
Ongoing Fee For Advice $1,000 $3,700 $13,000

 

Unfortunately, it is true that many Australians cannot currently afford holistic financial advice, as increased compliance loads and overheads have pushed a year-on-year increase in the average cost of advice. However, it is always worth speaking to an advisor and finding out where you stand.
Cost of financial advice last 5 years

Is A Financial Advisor Worth It?

If you think you are ready, you might start asking yourself “Is a Financial Advisor Worth it?” or “Are Financial Advisor Fees Worth it?”.
Imagine a set of scales with the fees you’re paying on one side and the financial benefits you’re receiving on the other – benefits that might include reaching your retirement savings goal, a steady increase in your net worth, or having the money to purchase your first house or investment property. This scale should undeniably tip towards the benefits – studies into the value of advice have shown that financial planning advice can add between 1.5% and 4% in financial returns over the long term. Additionally, if you have complex financial needs or lack the time to manage your finances, a financial advisor can save you time and money.
Value of a financial advisor infographic

✅ When time is of the essence, working with a financial advisor can save you hours of time on ad hoc tasks like coming up with an investment plan, instead you can spend that time on your million-dollar deals.

✅ Having a professional develop a tailored plan, that matches your risk tolerance and life stage, can help you reach your financial goals faster or more securely. For example, if you are an investor that has embraced high-risk in the past but you’re now nearing your goals, a financial advisor can help translate your aggressive investment strategy into a more balanced portfolio that can preserve what you have now and avoid risking major losses.

✅ Did you know that Australians pay an average of $2,400 each per year on their superannuation fees which is more than $30 billion for the whole country? A financial advisor can provide superannuation fund advice to help you lower your fees, which can save you more money than you think, and ensure that you achieve your best possible retirement.

Just remember, the crucial factor that determines if a financial advisor is the right step for you is not the amount of money you possess, but rather if a financial advisor will be able to provide value to you both now and in the future. As financial advisors, we have a ‘best interest’ duty to our clients. We will evaluate if we can provide value to you that will provide returns over and above what you pay in fees.  If we can’t provide long-term benefits with our services, then we may recommend a different professional service to assist you.

However, to finish this article how I started it, most people are able to benefit from the assistance of a financial advisor and a personalised financial plan!  To find the right advisor for you, consider your unique needs and do your research to ensure you find a reputable professional who is a good fit for you.

 

———————–
Envestnet 2019
, Capital Sigma, The Advisor Advantage estimates advisor value add at an average of 3% per year.
Vanguard 2019, Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha®, estimates lifetime value add at an average of 3%.
Russell Investments 2019, Value of a Financial Advisor Update estimates value add at more than 4% per year).

Cory Behrens - Financial Advisor

Cory has been providing holistic financial advice for 7 years. He enjoys helping people solve their financial problems & achieve success.

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