Financial advisers in Australia are typically paid through client fees, asset-based charges, salaries, or in limited cases, commissions from specific financial products such as insurance. These financial adviser fees and payment structures can influence how advice is delivered, so understanding them is an important part of assessing potential conflicts.
Financial planners and advisers providing personal financial advice must hold, or operate under, an Australian Financial Services Licence (AFSL) and are required to meet strict legal and professional standards.
Why payment structures matter
How an adviser is paid can shape their incentives. While most advisers operate under strict legal duties, including acting in a client’s best interests, payment structures can still create perceived or real conflicts.
In Australia, financial advisers must comply with the Corporations Act and are regulated by the Australian Securities and Investments Commission (ASIC). Advisers providing personal financial advice are required to act in the client’s best interests, prioritise those interests where conflicts arise, and clearly disclose how they are paid. These standards have been strengthened in recent years following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and ongoing reforms under the Delivering Better Financial Outcomes (DBFO) program.
Knowing how these payment models work can make it easier to understand how advice is structured and what to look for in a professional relationship.
The main ways financial advisers are paid
Fee-for-service
Fee-for-service is the most common model in Australia today, where clients pay directly for advice rather than through product-based payments.
Fees may be structured as a one-off cost for preparing a Statement of Advice (SOA), an hourly rate for specific work, or an ongoing fee for continued advice and reviews.
This model is generally designed to separate advice from product recommendations. However, it can still create commercial pressure to maintain ongoing service arrangements and demonstrate continuing value over time.
Asset-based fees
Under this model, an adviser charges a percentage of the assets they manage on behalf of a client, such as a superannuation balance or investment portfolio.
The fee typically increases as the portfolio grows and is often bundled with ongoing advice and portfolio management services.
Because fees are linked to the value of invested assets, this structure can create an incentive to keep funds invested rather than being used for other purposes, such as debt reduction or major spending decisions.
Commissions (limited use)
Commissions are payments from product providers to advisers.
In Australia, most commissions on investment and superannuation products were banned under the Future of Financial Advice (FOFA) reforms from 1 July 2013 as part of the conflicted remuneration rules. However, commissions still exist in some areas, particularly insurance.
For life insurance, commissions are regulated under the Life Insurance Framework (LIF), which introduced caps on payments to advisers. Since 2020, these have generally been limited to a maximum upfront commission of 60% of the first-year premium and an ongoing commission of 20%.
In practice, this means an adviser may receive an initial payment when a policy is set up and a smaller ongoing payment while it remains in place. These arrangements were originally designed to reduce upfront costs for clients, but they can also create incentives around product selection and the level of cover recommended.
Salary and bonuses
Some advisers are salaried employees of financial institutions or advisory firms, rather than being paid directly by clients.
Their remuneration may include fixed salary components along with performance-based bonuses tied to business outcomes such as client retention, revenue, or growth.
While this structure can provide income stability, bonus frameworks may still create indirect incentives that influence how advice is delivered or how client relationships are managed over time.
Comparing adviser payment models
| Payment model | Who pays | Common use case | Key conflict risk |
|---|---|---|---|
| Fee-for-service | Client | Personal advice, ongoing plans | Justifying ongoing fees |
| Asset-based fee | Client | Investment management | Incentive to keep assets invested |
| Commissions | Product issuer | Insurance advice | Product selection bias |
| Salary/bonus | Employer | Institutional advice roles | Performance-driven incentives |
Disclosure and transparency requirements
Australian regulation places strong emphasis on transparency.
Advisers must clearly disclose:
- All fees and charges
- Any commissions or benefits received
- Relationships with product providers
These disclosures are formalised through key client documents. This information is typically outlined in:
- The Financial Services Guide (FSG)
- The Statement of Advice (SOA)
- Ongoing fee disclosure statements
Ongoing fee arrangements are subject to disclosure requirements, although recent reforms under the DBFO framework have changed how these arrangements are renewed and documented for many clients.
Managing conflicts of interest
Conflicts can arise in many professional settings. The key issue is how they are identified, disclosed, and managed within the advice process.
Advisers are required to:
- Act in the client’s best interests
- Provide appropriate advice based on client circumstances
- Prioritise client interests where conflicts exist
Consumers can take practical steps to assess this:
- Ask how the adviser is paid, in plain terms
- Request a breakdown of all fees in dollar terms
- Check the adviser on the ASIC Financial Advisers Register
- Ask whether alternative strategies were considered
Questions to ask a financial adviser
Before engaging an adviser, it can help to ask some key questions:
- How do you get paid for your advice?
- Do you receive commissions or incentives from product providers?
- What services are included in ongoing fees?
- Can I stop or change the fee arrangement easily?
These questions are not about challenging the adviser, but about understanding the structure of the relationship.
FAQs
Are commissions banned in Australia?
Most commissions on investment and superannuation products were banned under FOFA reforms. However, commissions are still permitted in areas such as life insurance.
Is fee-for-service better than commissions?
Fee-for-service is generally seen as reducing certain conflicts, but it can still create incentives around ongoing fees. The quality and appropriateness of advice depends on more than the payment model alone.
What is an asset-based fee?
An asset-based fee is a percentage charged on the value of investments or superannuation managed by an adviser, typically on an annual basis.
How are commissions on insurance products regulated?
Commissions on life insurance are subject to caps under the Life Insurance Framework (LIF), which limits how much advisers can receive upfront and on an ongoing basis.
Do payment models affect the quality of advice?
Payment structures can influence incentives, but they do not determine the quality of advice on their own. Legal obligations, professional standards, and how conflicts are managed all play a role.
Final thoughts
Different payment models come with different trade-offs. The focus for consumers is usually on transparency, regulatory compliance, and whether the advice process is clearly centered on their needs.
Understanding how advisers are paid can help you interpret recommendations more clearly and engage more confidently in financial decisions.
