Paying a service fee is important.
Other ways of charging for financial advice create conflicts of interest.
Conflicts of interest regarding remuneration increase the chances of non-compliant (so bad it’s illegal) advice by 6 times.
Of the latest ASIC study into the provision of financial advice, only 3% of advice was classified as good; of this small category 100% of the clients were charged a flat fee for service.
We often hear the counter argument that asset based fees align the planner’s results and therefore incentives with their clients’; but in our opinion the results do not back that up, a major reason for this is that the most suitable financial strategy may not involve accumulating a financial product, which means the financial planner has a conflict of interest, the best example of this is the strategy of reducing debt rather than building an investment portfolio (that may pay an asset based fee)
From the ASIC report:
“The 25 cases (38% of those assessed) of poor advice all involved poor strategic advice…This commonly included the failure of advisers to address areas that did not directly involve investment products.”