Overview: Most Australians don’t realise how much money quietly disappears into commission-based financial advice and financial planner fees. These fees eat into your returns whether the market is going up or down.
While the industry claims to put your interests first, the reality is it often acts as a salesperson for investment products rather than planners with genuine concern to help. By learning the basics of active investing in Australia, you can take back control, lower costs, and build long-term wealth without paying for unnecessary fees.
Have you ever stopped to check how much of your investment returns are quietly being eaten away by fees? For many Australians, the answer is… too much. Financial planners and fund managers often promote themselves as guardians of your wealth, yet their paychecks usually don’t depend on whether you make money. Instead, they collect commissions, trailing fees, and ongoing charges that continue regardless of your fund’s performance.
A 2018 Productivity Commission report found that unnecessary fees and insurance can erode a worker’s retirement savings by up to $500,000 over their lifetime. That is half a million dollars gone… not because of poor market returns, but because of charges.
This raises a serious question: if the people managing your money always win, even when you lose, who are they working for?
Why Do Financial Planners Charge So Much?
Because running a financial advice business is expensive and many planners are paid through ongoing fees or commissions, costs, and incentives that don’t always depend on how your investments perform.
If you’ve ever sat down with a planner, you probably expected their main focus to be growing and protecting your savings. After all, they’re the professionals, right? They juggle compliance rules, paperwork, and investment products, so it feels natural to assume those big fees equal better results.
But regulation in Australia is tough. Planners must pay for licensing, professional indemnity insurance, and levies introduced after the Royal Commission. These overheads drive up their prices.
On top of that, many advisers still use percentage-based management fees or trailing commissions. That means they keep earning even when your portfolio takes a hit.
ASIC has warned for years that this setup can create conflicts of interest—some advisers may be tempted to recommend products that pay them more rather than what’s best for you.
Key Takeaway: High fees often reflect both the heavy costs of running a regulated advice business and a payment model that rewards planners whether your portfolio grows or shrinks—so it pays to ask how your adviser is compensated.
Are Financial Planners Really Acting in Your Best Interest?
Many Australians believe financial advisers are money managers. While some of them do, in reality, most advisers operate as a distribution network for financial products.
As one well-known quote in the industry puts it, “93% of financial advisers are purely salesmen armed with an instruction manual on how to close a sale.” Their training often focuses more on selling than on teaching risk management, diversification, or market timing.
So here’s the question: if fund managers are meant to manage investments, and financial planners are simply introducing clients to those products, why do you need both? This overlap is what makes financial planner fees such a hot issue.
Key Takeaway: Much of the industry is sales-driven rather than focused on wealth creation. Paying both planners and fund managers often results in double layers of fees with little added value.
What Happens When Markets Crash?
When markets are rising, fees don’t seem like a big deal. Investors see their portfolio going up and overlook the cut that managers take. But when the market falls, the cracks appear.
Imagine your Super fund or retirement portfolio loses 20%. You are down tens of thousands of dollars. Yet the adviser and fund manager still extract management fees, performance fees, and FuM-based charges (Funds under Management). In fact, some funds even charge performance bonuses in negative years if they “beat the benchmark”… even if your balance is lower.
According to a 2021 Productivity Commission report, Australians are paying billions each year in superannuation and financial advice fees that reduce retirement balances by tens of thousands of dollars over a lifetime.
Key Takeaway: Fees hurt the most during downturns. Even when you lose money, advisers still get paid. This shows why blindly relying on planners can compound losses in bad times.
How Bad Can Hidden Fees Get?
In the United States, after the Global Financial Crisis, some major investment banks paid out billions in staff bonuses even after being bailed out by taxpayers. One U.S. bank lost $27 billion in a single year, yet still awarded $4 billion in bonuses.
The lesson is clear. Whether the markets soar or sink, the commission-based financial advice industry has found a way to keep collecting its share.
Key Takeaway: The financial industry is structured to reward itself even when clients suffer. Without transparency, hidden fees can devastate portfolios over time.
Can Active Investing in Australia Be a Better Path?
The good news is that there is another option. You can learn to become your own fund manager.
Active investing does not mean day-trading or gambling on stock tips. It means taking responsibility for your capital, understanding basic principles, and applying consistent strategies to grow wealth.
With the right education and tools, individual investors can make smart decisions without handing over large percentages of their money to third parties. In fact, some research shows that low-cost, rules-based investing strategies often outperform expensive managed funds over time.
Key Takeaway: Active investing doesn’t mean reckless trading; it means applying consistent, low-cost strategies yourself. With the right education, individuals can outperform high-fee managed funds.
How Can You Protect Yourself from Financial Planner Fees?
If you want to avoid overpaying, ask yourself a few questions before hiring any adviser:
- How are you paid? If their compensation depends on selling products, be cautious.
- Do you receive trailing commissions? These eat away at your returns for years.
- What value do you provide that I cannot learn myself?
- Can you prove long-term outperformance after fees?
If they cannot answer clearly, it may be time to consider handling at least part of your investing yourself.
Key Takeaway: Always ask advisers how they’re paid and what unique value they provide. If they can’t justify their fees, you may be better off managing your own portfolio.
Should the Industry Be Reformed?
Many experts believe the system should be restructured so advisers are paid only for time spent with clients, not for selling products. This would remove conflicts of interest and keep only the true professionals in the industry.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry uncovered widespread abuse, including advisers charging fees for no service at all.
Until regulators make serious changes, the responsibility often falls back on individuals to protect themselves.
Key Takeaway: Until the industry removes conflicts of interest, individuals must remain cautious. Protecting your wealth often means questioning whether advisers truly work for you.
What’s the First Step to Becoming Your Own Fund Manager?
The first step is education. No one is born knowing how to manage money, but anyone can learn. You don’t need to understand every financial product under the sun. What you do need is a repeatable framework for investing and the discipline to stick with it.
Start small, track your results, and stay consistent. Many investors discover that once they learn a structured approach, they are more confident than when relying on advisers who may not truly have their best interests at heart.
Key Takeaway: Managing your own investments starts with learning and consistency, not complexity. A repeatable framework can help you grow wealth with confidence and independence.
Frequently Asked Questions
Is all commission-based financial advice bad?
Not necessarily. Some advisers provide genuine value, especially around tax planning or estate issues. The danger lies in hidden commissions that reduce transparency.
How much are financial planner fees in Australia?
According to ASIC’s MoneySmart website, fees can range from $2,000 upfront to $5,000 annually, plus trailing percentages of assets. Over the decades, these add up significantly.
Can active investing really beat professional managers?
Yes, particularly if you keep costs low. Many studies show that most managed funds underperform the market after fees.
What about superannuation funds?
Super funds are essential, but not all are equal. Compare their fees carefully. Even a 1% difference in fees can mean hundreds of thousands of dollars less in retirement savings.
Do I need formal training to manage my own investments?
No. Many resources are available to help beginners. What matters most is developing a process and sticking to it.