09 June 2026
It is important to know that the person guiding you is genuinely acting in your best interests and your adviser’s recommendations are not influenced by the prospect of higher remuneration which benefits them at your expense.
Since July 2013, as part of the Future of Financial Advice (FOFA) Reforms, the receipt of commissions on investment and superannuation advice has been banned and should now be a thing of the past. However, except where borrowings or gearing is concerned, this banning did not extend to the ability for advisers to charge Asset Based Fees and one should question whether Commissions vs Asset Based Fees are essentially the same. We’ll explore this further in article.
Financial advisers can still receive commissions on Life and Risk Insurance policies but commissions must not bias insurance recommendations. In theory this sounds okay but in practice I don’t believe it works due to the nature of this type of advice, ie this advice is based on ‘Risk’ and protecting against the financial penalties as well as legal consequences for being under-insured. It is less risky for recommendations to be over-insured then under-insured, it is less risky for policies to have all the bells and whistles which raises premiums then to have a disgruntled client or family member come back to ask why their adviser did not recommend this to them during their initial conversations. Let’s also not forget that advisers generally will hold superior knowledge, are backed up by persuasive sales tactics and clever sales marketing which is run by the insurance companies they are trying to sell. In general, the premium may be acceptable when initially sold but given time, they won’t end up this way.
The alternative is, commission-free insurance advice which removes ‘conflicts of interest’ ensuring your strategy is built exclusively around what you and your family needs and not what your adviser has managed to ‘sell’ to you.
When choosing an adviser, understanding how they are paid tells you where their priorities lie. In Australia, an adviser’s remuneration for advice generally falls into 3 fee models:
The adviser recommends an insurance product (like life insurance or income protection) and the insurance company pays a commission to the adviser for helping with the sale of the policy. You, the policy owner indirectly pays the advisers commission by simply agreeing to pay your premiums year on year.
The issue is that insurance commissions creates a potential conflict of interest for financial advisers because there is a direct connection between their remuneration and the premium size, rather than the objective quality or necessity of the advice.
This structural conflict can directly challenge a planner’s fiduciary duty to act
in the client’s best interests. For example, it can still lead to recommendations over-insurance or still lead to unethical practices such as insurance policy churning to generate additional large upfront commissions.
Also on this topic of over-insurance, something I often see are cases where an insurance policy had been sold some years ago with CPI increases built into the sums insured. In combination with Stepped premiums, not only will ongoing trail commissions increase and be paid to the adviser but the adviser will also receive added commissions based on the CPI increase.
In theory, through the payment of debt, increased wealth and provisioning for education expenses decreasing over time, if this was an advised client, the total sums insured should be decreasing. But in practice, there no obligation for the adviser to review these policies and they are incentivised to turn a blind eye because the commission will still come through.
The adviser charges a percentage of the total money they manage for you (e.g., 1% of your portfolio). It can also be based on a formula, for example a Tiered Formula. This fee should reflect the services provided to the client and is agreed to by the client. This is different to a Commission because it is not earned when an adviser successfully sells a policy and is based on service, whereas something like ongoing trail commission is paid irrespective of service.
While common, this model disincentives strategies that lower your investment balance—such as paying off your mortgage or gifting money to family. On the other side it can incentivise the adviser to recommend higher risk investments which are outside the client’s risk tolerance with the aim of growing their client’s portfolio allowing the adviser to be remunerated more.
Where this fee is centred on investment expertise, recommendations and investment advice there are also questions around the rationale and use of this model. For example, is the adviser’s time and effort to service, manage, research and transact on a $500,000 investment portfolio the same as a $2,000,000 investment portfolio? What if I said that the exact same recommendations, products and investments were made across both portfolios? Does this entitle the adviser to 4 times the fee? To what extent should the adviser account for the added risks associated with managing and transacting on higher balances and seeking compensation where things could go wrong?
You pay a clear, agreed-upon flat fee for the adviser’s time and expertise, much like paying an accountant.
Fee for service eliminates product-sales bias and aligns costs strictly with the service and value provided. Instead of an adviser taking a percentage of your growing portfolio regardless of the work done, you pay a clear, transparent rate for specific, agreed-upon services
At VTA, we operate strictly on a fee-for-service model with fees quoted based on complexity, time and research. The advice is detached from financial products or portfolio size. For insurance advice, you can explore this further in our guide on insurance advice with or without commissions
Where conflicted remuneration does not exist and the adviser is not incentivised or has no financial stake in the products they recommend, you can trust their guidance is impartial and that they are acting in your best interests rather than their own.
In Australia, calling yourself an “independent financial adviser Australia” is a strict legal standard under the Corporations Act. True independent advisers cannot be owned by banks, nor can they accept commissions or asset-based fees.
To verify an adviser’s independence, ask these three direct questions in your first meeting:
Always ask for their Financial Services Guide (FSG), a legal document that confirms their fee structure in writing. We cover this in more detail in our guide on how to choose a financial adviser
Financial advice has a direct cost, which you should view as an investment in your financial security.
According to recent industry data, the median cost for a comprehensive initial strategic plan ranges between $3,500 and $6,000, while ongoing retainer fees median around $4,700 per year. You can read more about expected advice fees on the Moneysmart website. This cost covers a dedicated professional optimising your retirement income, managing tax strategies, and helping you avoid costly mistakes.
My number one tip is to take advantage of any complementary discovery meetings offered by your adviser, question how their fees are determined and shop around. This meeting should be focused on what services you require and whether the fee structure is acceptable to you. Don’t be hesitant in asking for once off advice if this is all you want.
If fees are of concern, the right adviser may be prepared to take on the work for less – you will never know if you never ask.
Financial planning shouldn’t be overwhelming. Your first chat with an adviser is simply an opportunity to see if you connect with their approach and if they can provide the clarity you need. Book a complimentary, no-obligation consultation with us today.
This article contains general information only and does not constitute personal financial advice. Before making any decisions, you should consider your own objectives, financial situation, and needs, and seek professional guidance.
