Fee for Service versus Commissions: What’s the Difference?

Posted in Wealth
06/03/2013 Level One

Fee for Service is exactly what it sounds like: you are charged a fee for the service you are provided. This fee could be calculated upon an hourly rate, be a percentage of your assets under management or be a fixed fee agreed upon for the service sought. In any instance, a Fee for Service arrangement with your adviser ensures the utmost transparency and honesty.

Another method financial advisers can be paid is via commissions. These commissions are in most cases paid by the product provider and not ‘directly’ paid by you.

All financial advisers have a responsibility to act in their client’s best interests; however this has long been abused by a small number of advisers. This abuse has most certainly been fostered by the payment of commissions and volume bonuses by financial product providers. Product providers often inflate their commissions to motivate advisers to invest heavily in their products. Similarly, the providers may also offer a ‘volume bonus’ to incite the adviser to invest many of their clients into the product offered.

This remuneration structure can see investors stung by advisers lining their own pockets or ignoring whether the product is appropriate for the individual investor, which could result in financial loss.

Level One does not accept commissions and will always rebate 100% of any commission offered back to our client, where possible. The only exception here is commissions generated via some personal insurance products. All fees that we receive for the service we provide to you are clearly disclosed and discussed. We don’t hide our fees.

We instead structure our primary fee arrangement around managing all of a client’s financial affairs. Many of the services we perform for our clients depend on a comprehensive strategic plan that goes beyond investments. Trying to answer one issue in isolation can be difficult; hence our services strive to be more holistic.

The methods we use for charging fees are hourly rates, fixed fees or as a percentage of assets under management and depend on the task at hand

By adopting this fee structure we are not bound to provide you with specific products and we are not aligned with any product providers. This independence is further enforced by the fact that we have our own Australian Financial Services Licence and are not dictated to by a large branded dealer group. Instead you get the most appropriate advice for your circumstances – not ours. You can also clearly identify your fees at any time which promotes the highest level of transparency.


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