Advisor fees
This guide covers the types of advisor fees, how to analyze them, and strategies for minimising these costs while maintaining quality advice.
Advisors are people that provide personalised and specific valued guidance. If you're paying someone that sends you a newsletter each month, that's not advice, you're getting ripped off. Advisors provide a real benefit by educating you on compliance, risk and strategy. A buyers agent, as an example, can do both. They can make sure you don't buy a house that has significant issues you would have otherwise missed, and they can negotiate a better price saving you well in excess of their fee. This would be classed as good advice; when you get more back than what it cost you. But there is plenty of people willing to charge you for bad advice. In general if it's not event based advice, then it's probably not worth it, a good advisor doesn't need to provide the same advice every year because they educate you how to do it yourself.
Example: Chiropractor vs Physio
If you hurt your back you could see a chiropractor or a physio. The chiropractor will tell you how skilled they are, provide you temporary relief and tell you to come back next week - that's management, not advice. A physio will manage pain, explain what is happening to your muscles, and give you exercises to correct. They will advise you and empower you to take control - that's good advice.
Analyse & negotiate fees
1. Get Quotes
Never agree on the spot. Collect quotes from multiple advisors, compare inclusions, and make an informed decision. Do self education on the topic first so you know what questions you need to ask.
2. Calculate Total Cost
Include every fee: management, performance, platform, transaction, and hidden charges. Express them as both dollar amounts and hourly rates. For example, a real estate sales agent might add 2% to your sale price, but that does not mean they should keep the entire uplift. Shop around and negotiate any percentage commission that produces an excessive dollar amount.
3. Evaluate Value Proposition
Assess the upside the advice enables and the downside it protects you from. Compare service quality, responsiveness, and investment performance relative to the fees charged.
4. Consider Your Situation
Factor in portfolio size, complexity, time availability, and your own investment knowledge. Advisors deliver the most value when their expertise directly addresses an event or decision you cannot confidently manage alone.
Events worth seeking advice for include:
- Buying or selling property
- Establishing trusts or companies
- Defining an investment strategy
- Preparing critical documents such as wills or powers of attorney
- Managing litigation
- Responding to significant health or medical issues
You can even get advice on the advice. A vendor's advocate is someone who will help you prepare your home for sale, negotiate contracts with sales agents and guide you through the sale negotiation when the sales agent is trying to tell you this is the best price you'll ever get and pressure you to sell. And they generally don't cost you anything directly.