The average ongoing advice fee has risen by nine basis points since 2023, with a growing share of advisers charging between 91 and 100 bps for ongoing advice, a new report from NextWealth has revealed.
The firm’s fee benchmarking report explores pricing structures, fee trends and how financial advisers are adapting charging models.
It found asset-based fee structures are used by 70% of advisers, with fixed fees second most common, used by 29%.
NextWealth said the vast majority (85%) of clients say they understand the fees they pay and 76% believe they receive good value for money.
The report found that trust in the adviser, the quality of financial planning and investment performance are the top factors valued by clients, with investment performance ranking third. Regular communication and good use of technology to help clients manage their finances is also considered important.
Heather Hopkins, managing director of NextWealth, said: “The financial advice market is under increasing scrutiny, with regulatory change, consumer expectations and competitive pressures reshaping how firms set and justify their fees.”
Hopkins said advisers must strike a “delicate balance”, ensuring profitability while demonstrating value to clients.
She continued: “While the regulator is focussed on value, the cost of delivering advice is mounting. This has forced many firms to increase their fees. Despite this, more than three quarters of advised clients say they receive good value for money.”
Clients paying fixed fees are more likely to say they represent good value and 19% more likely than those paying asset-based fees to say they receive excellent value for money. Younger investors under the age of 55 tend to prefer fixed fees, while clients over 55 prefer asset-based charges.
The report also revealed a marked increase in the variety of fee structures used by advisers, specifically subscription, capped and hourly rates. This trend towards a greater variety of fee models is mostly driven by larger advice firms.
Hopkins said: “What we’re seeing is a much greater appetite for flexibility, with more advisers offering alternative fee structures. Offering flexibility allows firms to cater to the needs of a wide range of clients and is more common in larger firms.”
Hopkins added that the generational difference on fees suggests that firms looking to attract the next generation of investors will need to offer a variety of models going forward.
Main image: thorat-6AKLKt-KmdY-unsplash
