Should advisers detail regulatory fees to their clients?

With consumers often not realising the full extent of underlying costs in operating an advice practice, Adviser Ratings debates whether regulatory charges should be separated from advice fees.

The average adviser fee in 2025 continues to climb an upward trajectory, rising 4 per cent from the previous year to $4,744 per annum, according to Adviser Ratings. In comparison, advice fees stood at approximately $2,510 in 2018 – marking a near 90 per cent increase over the past seven years.

Four key mandatory costs contribute to this figure:

• Licensee services
• Professional indemnity (PI) insurance
• ASIC industry funding levy
• Compensation Scheme of Last Resort (CSLR)

The cost of operating under an AFSL represents the most significant cost for advice practices, which can range from $20,000 to $50,000 or higher per adviser each year.

For PI insurance, this can vary substantially from $500 to $75,000 annually, with an average of $8,321 when bundled into licensee costs and $8,075 when self-obtained, Adviser Ratings calculated.

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The current ASIC levy charges a minimum of $1,500 plus $2,691 per adviser, while the CSLR levy stands at $1,186 per adviser this year.

All up, these annual costs can range from $36,896 per adviser on the lower end of the spectrum to $83,877 on the higher end for those paying greater licensee fees and insurance premiums, Adviser Ratings estimated.

With many consumers unaware of these mandatory costs, Adviser Ratings questioned whether regulatory costs should be itemised separately from advice fees, similar to how GST is treated for Australian consumers.

According to the 2024 Australian Financial Advice Landscape Report, regulatory costs account for approximately 5–10 per cent of total advice costs for the majority of practices.

Considering the benefits of a GST-like approach, Adviser Ratings identified several positives including greater fee transparency and industry advocacy.

“Breaking out government charges would help clients better understand the components of their advice costs. Just as consumers understand GST as a government tax rather than a business charge, they could see how regulatory levies impact their advice fees,” it stated.

Similarly, this could help consumers understand the true cost structure of providing advice, rather than assuming a $4,744 fee is predominantly profit for the adviser.

Adviser Ratings continued: “Making these costs visible could drive more informed discussion about the impact of regulatory charges on advice affordability. Currently, these costs are hidden within overall advice fees, potentially masking their impact on accessibility.”

However, the firm also weighed up the negative implications this approach could have. For example, separating these costs could place more administrative complexity onto fee documentation.

“Adding more line items to fee structures could also confuse clients rather than enhance transparency. The current ‘all-inclusive’ fee approach may be more straightforward for clients to understand.”

A potential middle ground between these perspectives could be to include regulatory charges as an explanatory note in fee documentation without necessarily separating them in the actual fee structure, the research house explained.

“This could provide transparency about what is driving advice costs, particularly how regulatory costs impact the overall cost while maintaining simplicity in fee arrangements.

“The path forward may depend on how the profession collectively decides to present these costs and whether regulators provide guidance on fee presentation in their upcoming reforms. What’s clear is that improving transparency around advice costs remains crucial for building trust and understanding with clients.”