How do KMA representatives earn their income?
Below is a description of the various methods that a representative can charge for their services.
The adviser may elect to charge a fee or commission or a combination. In any event the fee or commission charged by your adviser will be fully disclosed in the SoA (Statement of Advice) provided to you.
Out of the Fee or Commission the adviser has to meet all of their business running costs before their net taxable income can be determined.
The type of expenses that they may be liable for include by not restricted to: Office Rent, Telephone Calls, Salaries, Computers, Software, Faxes, Phone Systems, Car Running Expenses, Workers Compensation, Professional Indemnity Insurance, Fire & General Insurance, Super Guarantee for employees, Accountant fees, Advertising and so no.
TYPES OF COMMISSION & FEES
COMMISSION ON INVESTMENTS
INITIAL:
Initial Commission is as the name suggests, it is charged on the placement of the initial investment amount and is charged only once.
This commission is for the adviser time to accumulate details of the Client’s personal and financial details, understand the Client’s needs, analyse these details, research appropriate investment products, prepare a SoA (Statement of Advice) and present and discuss these recommendations. If the client is in agreement with the Advice, implement the plan.
This commission is expressed as a percentage of the total amount invested.
On an investment this can be up to 5.5% GST inclusive of the total amount invested which would leave the amount invested being reduced by the commission amount.
ON-GOING:
This commission is to cover time the adviser spends during each calendar year on answering queries the client may have about their investment and also to cover time spent on doing formal reviews. The On-Going commission can fall into two parts and the level of this commission will be determined by the level of service required during the year. Part 1 would normally cover incidental service such as answering phone calls about a client’s investment, looking for clients who have investments that have been removed from the Licensee’s Recommended List and general client account maintenance.
Part 2 would normally cover formal reviews
Part 1
This where the Investment Manger pays the adviser part of their MER (Management Expense Ration) For Example, if the MER is 2%, the Fund Manager may pay 0.5% of that 2% to the adviser and retains 1.5% to manage the funds.
Part 2
This is an Adviser Service Fee. The adviser is able to charge up to an additional 1.1% of the account balance to service a client’s portfolio. This is only charged with the client's consent.
COMMISSION ON RISK INSURANCE:
INITIAL:
Commission is the best way for client to pay for and to receive advice on Risk Insurance.
Some Risk Insurance Companies are allowing advisers the ability to reduce the premiums up to 30% if the adviser does not take any commission. As we all know, an adviser is running a business and cannot work for nothing. If the client pays the standard premium the adviser can receive up to 125% of the first year’s premium. This also takes into account that some aplicants may be declined by a Life Insurance company and in this case the adviser does not get paid for thier work.
ON-GOING:
This can be up to 15% ongoing which goes in a small way to pay for services duting the year such as obtaining certificates of currency, changing addresses or bank account details.
FEES:
Set Fee:
This is where the adviser sets a fee for their service and is charged by Tax Invoice separate from the Investment. This normally means that the total amount is invested with no reduction.
The fee set by an adviser has no relation to an hourly rate. The fee is set by the adviser giving consideration to the adviser’s education, training and expertise to recommend strategies suitable to their clients needs
Hourly Rate:
This is where an adviser may not have a clear idea as to how long it will take to prepare the advice required by the client OR the advice or service required is simple in nature and the adviser chooses to charge an hourly rate.
As of the 22nd August 2005 the hourly rate is $220.00 GST inclusive.
CONCLUSION
All of our advisers offer an initial interview fee free.
At this interview the prospective client can see the services available and the adviser can see what advice the client requires.
At the end of this interview the adviser will be able to give the prospective client and idea on the amount of Commission, Fee or Combination that would be charged for the advice or service required. At this time the Client can agree, discuss or not proceed.
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