Last Updated: December 2025 | Last Verified: December 2025
Wealth management firms operate under significant regulatory oversight, with bookkeeping requirements that extend well beyond standard business accounting. Firms must track multiple fee structures including initial advice fees, ongoing service fees, and asset-based charges. They must maintain strict trust account separation for client funds, meet Australian Financial Services Licence (AFSL) compliance obligations including minimum net tangible asset requirements, and navigate complex GST treatment where most financial services are input-taxed rather than standard taxable supplies.
ASIC surveillance data shows that inadequate financial record-keeping remains a common finding in adviser audits, with fee disclosure failures and trust account breaches among the most serious compliance issues identified. The shift from commission-based to fee-for-service models has increased the complexity of revenue recognition and created new compliance obligations around Fee Disclosure Statements.
This guide explains how to manage bookkeeping for wealth management firms in Australia, covering fee structures, trust accounts, AFSL compliance, understanding financial statements, and the specific reporting requirements of financial advisory practices.
Wealth management firms require a chart of accounts that separates fee income by type, tracks adviser revenue for split arrangements, and supports AFSL compliance reporting.
- Advice Fees include initial advice fees charged for Statement of Advice preparation (typically $3,000 to $10,000 depending on complexity), ongoing advice fees under annual service agreements (commonly $3,000 to $15,000 annually), and ad-hoc advice fees for specific consultations such as Centrelink strategies or insurance reviews.
- Platform and Product Fees include asset-based fees calculated as a percentage of funds under advice (typically 0.3% to 1.0% annually), platform rebates where permitted under current regulations, and insurance commissions from risk products including life insurance, TPD, income protection, and trauma cover.
- Other Revenue includes referral fees from accountants, lawyers, and mortgage brokers, seminar and education program fees, SMSF administration and accounting fees if offered as a service, and estate planning document preparation fees.
Wealth management firms have specific expense categories including adviser remuneration (employed advisers on salary plus super, or contractor arrangements with percentage splits typically 60/40 to 80/20), paraplanner costs (employed or outsourced SOA preparation), client service manager and administration salaries, professional indemnity insurance (typically 1% to 3% of revenue), AFSL fees and ASIC industry funding levies, compliance consulting and audit costs, research subscriptions (Morningstar, Lonsec, Zenith), financial planning software (Xplan, Midwinter, Advice Intelligence), and CRM and practice management systems.
Wealth management firms holding client money must maintain trust accounts that comply with AFSL conditions and Corporations Act requirements. Trust account compliance is a serious matter, with breaches potentially resulting in AFSL suspension or cancellation.
Client funds received must be deposited into a designated trust account within one business day and kept completely separate from operating funds. Common situations requiring trust accounts include client contributions awaiting investment into platforms or products, proceeds from asset sales pending reinvestment or distribution, fee payments collected in advance where permitted, and insurance premium collections.
Example: Client provides $50,000 for investment. The funds are deposited into the trust account on receipt. When the investment is placed three days later, funds are transferred from trust to the platform. The trust account entries are:
On receipt: Debit Trust Bank Account $50,000, Credit Trust Liability (Client Funds Held) $50,000
On investment: Debit Trust Liability $50,000, Credit Trust Bank Account $50,000
Trust accounts must be reconciled at least monthly, though weekly reconciliation is recommended given the serious consequences of errors. The reconciliation must demonstrate that the trust bank balance equals total client entitlements recorded in the trust ledger. Any discrepancy must be investigated and resolved immediately. Records must be maintained for seven years and be available for ASIC audit.
Interest earned on trust accounts may belong to the firm or clients depending on AFSL conditions and client agreements. This must be clearly disclosed in the Financial Services Guide. Interest income should be recorded separately and allocated according to the agreed arrangements.
The industry shift from commission-based to fee-for-service models has fundamentally changed how wealth management firms recognise revenue. Accurate fee tracking is essential for both financial reporting and Fee Disclosure Statement compliance.
Initial advice fees are recognised when the Statement of Advice is delivered and accepted by the client, not when payment is received or when work commences. If the fee is paid in advance, it should be recorded as deferred revenue until the advice is provided.
Example: Client pays $5,500 initial advice fee on 1 March. SOA preparation takes six weeks with delivery on 15 April.
On 1 March (payment received): Debit Bank $5,500, Credit Deferred Revenue $5,500
On 15 April (SOA delivered): Debit Deferred Revenue $5,500, Credit Initial Advice Fee Revenue $5,500
If the initial fee is paid after SOA delivery, recognise revenue on delivery with corresponding accounts receivable.
Ongoing advice fees under Fee Disclosure Statements are recognised monthly as the service is provided, regardless of billing frequency.
Example: Annual ongoing advice fee of $6,600 under service agreement billed quarterly in advance.
On 1 July (quarterly invoice): Debit Accounts Receivable $1,650, Credit Deferred Revenue $1,650
On 31 July (first month elapsed): Debit Deferred Revenue $550, Credit Ongoing Advice Fee Revenue $550
Repeat monthly until the quarter is fully recognised.
Asset-based fees calculated as a percentage of funds under advice are recognised as the service is provided, typically monthly or quarterly in arrears based on portfolio values.
Example: 0.5% annual asset-based fee on $2 million portfolio.
Annual fee: $10,000. Monthly recognition: $833 (based on actual portfolio value at each calculation date, so this will fluctuate with market movements).
If portfolio grows to $2.2 million by December, that month's fee recognition would be $917 ($2.2m x 0.5% / 12).
Initial insurance commissions are recognised when the policy is issued and the commission is earned. Trail commissions are recognised as they accrue, typically monthly. Clawback provisions apply to most life insurance products, requiring a provision for potential commission reversals.
Example: Life insurance policy with $3,000 initial commission and 24-month clawback period. Based on historical lapse rates of 10%, maintain a clawback provision of $300 ($3,000 x 10%).
The profit and loss statement shows your firm's financial performance over a specific period, revealing whether the practice is generating sustainable profits and which revenue streams are driving or dragging performance.
Revenue should be separated by type to enable meaningful analysis. Initial advice fees show new client acquisition activity. Ongoing advice fees demonstrate recurring revenue stability. Asset-based fees reveal market exposure and funds growth. Insurance commissions indicate risk product focus.
Example P&L Revenue Section:
Initial Advice Fees: $180,000Ongoing Advice Fees: $420,000 Asset-Based Fees: $285,000I nsurance Commissions: $95,000
Total Revenue: $980,000
This breakdown shows 43% recurring ongoing fees (good stability), 29% asset-based fees (market-sensitive), and only 18% from initial advice (indicating mature client base with limited new client growth).
Direct costs of providing advice include paraplanner fees (employed or outsourced), research and platform costs directly tied to client service, and adviser commissions if paid as a percentage of revenue generated.
Example: Paraplanning costs $120,000 (outsourced SOA preparation), research subscriptions $18,000, platform administration $12,000. Total cost of sales: $150,000.
Gross Profit: $980,000 minus $150,000 equals $830,000 (85% gross margin).
Operating expenses include all costs of running the practice. Key categories for wealth management include employed adviser salaries and superannuation, client service and administration staff, office rent and outgoings, professional indemnity insurance, AFSL fees and ASIC levies, compliance and audit costs, technology and software, and marketing and business development.
Net profit after all expenses represents what the practice actually earned. For wealth management firms, benchmark net profit margins range from 15% to 30% depending on scale and efficiency.
Example: Total operating expenses $650,000. Net profit: $830,000 minus $650,000 equals $180,000 (18% net margin).
Revenue per adviser indicates productivity (benchmark $300,000 to $600,000 per adviser). Recurring revenue percentage shows business stability (target above 60%). Cost to income ratio measures efficiency (target below 70%). Client acquisition cost versus lifetime value indicates marketing effectiveness.
The balance sheet shows your firm's financial position at a specific point in time, listing what you own (assets), what you owe (liabilities), and the residual value belonging to owners (equity). For wealth management firms, the balance sheet is particularly important for AFSL compliance as minimum net tangible asset requirements must be maintained.
- Current Assets include cash at bank (operating and trust accounts shown separately), accounts receivable (fees invoiced but not yet paid, typically 30-60 days), work in progress (advice being prepared but not yet billed, valued at expected recoverable amount), and prepaid expenses (insurance, subscriptions paid in advance).
- Non-Current Assets include office equipment and furniture, computer equipment and software licences, leasehold improvements, and client book value if purchased (amortised over expected useful life, typically 5-10 years).
Example Balance Sheet Assets:
Cash at Bank (Operating): $85,000Cash at Bank (Trust): $120,000Accounts Receivable: $65,000Work in Progress: $28,000Prepaid Expenses: $15,000Total Current Assets: $313,000
Office Equipment: $25,000Software Licences: $12,000Client Book (net of amortisation): $180,000Total Non-Current Assets: $217,000
Total Assets: $530,000
- Current Liabilities include accounts payable (supplier invoices owing), deferred revenue (fees received in advance for services not yet provided), trust account liability (equal to trust bank balance, representing client funds held), employee entitlements (accrued annual leave and long service leave), GST and PAYG payable, and provisions (including clawback provisions for insurance commissions).
- Non-Current Liabilities include loans and finance agreements extending beyond 12 months, and long service leave provisions for long-term employees.
Example Balance Sheet Liabilities:
Accounts Payable: $22,000Deferred Revenue: $45,000Trust Account Liability: $120,000Employee Entitlements: $38,000GST Payable: $8,000Clawback Provision: $15,000Total Current Liabilities: $248,000
Bank Loan: $50,000Total Non-Current Liabilities: $50,000
Total Liabilities: $298,000
Equity represents the owners' interest in the business, calculated as assets minus liabilities. Components include contributed capital (owner investments), retained earnings (accumulated profits from prior years), and current year profit.
Example: Total Assets $530,000 minus Total Liabilities $298,000 equals Equity $232,000.
AFSL holders must maintain minimum net tangible assets. Calculate NTA by taking total equity and subtracting intangible assets (such as client book value and goodwill).
Example: Equity $232,000 minus Client Book $180,000 equals NTA $52,000. If AFSL requires $50,000 minimum NTA, the firm is compliant but has minimal buffer.
Financial services GST treatment is complex and differs significantly from standard business GST. Understanding these rules is essential for correct BAS preparation.
Most wealth management fees are input-taxed under Division 40 of the GST Act. This means no GST is charged to clients, but importantly, no input tax credits can be claimed on related expenses. Input-taxed services include investment advice fees, portfolio management fees, asset-based fees, ongoing advice fees related to financial products, and insurance commission income.
Example: Ongoing advice fee of $6,600. No GST is added to this fee. It is recorded as $6,600 income with no GST component.
The consequence of input-taxed treatment is that expenses related to providing these services do not generate input tax credits. Rent, salaries, software, and other costs include GST that cannot be recovered.
Some services are taxable at 10% GST including general business consulting not related to financial products, seminar and education fees, SMSF administration services (in most circumstances), and estate planning document preparation.
Example: SMSF administration fee of $2,200 including GST. GST component is $200. Record as $2,000 income plus $200 GST collected.
Financial services providers can claim reduced input tax credits (RITC) at 75% on specific expense categories. RITC-eligible expenses include external audit and assurance services, actuarial services, certain legal services related to financial services, and some accounting and tax agent services.
Example: External audit fee $5,500 including $500 GST. RITC claimable: $500 x 75% = $375.
Firms providing both input-taxed and taxable services must apportion input tax credits on mixed expenses based on the proportion of taxable versus input-taxed revenue.
Example: Firm has 80% input-taxed revenue (advice fees) and 20% taxable revenue (SMSF admin). Office rent $5,500 including $500 GST. Claimable input tax credit: $500 x 20% = $100.
Wealth management firms must maintain specific financial records to meet AFSL obligations. These requirements are in addition to standard business record-keeping.
AFSL holders must meet base level financial requirements that vary by licence class. Common requirements include minimum net tangible assets (typically $50,000 to $150,000 depending on authorisations), cash resources adequate to meet projected expenses, and surplus liquid funds to cover at least three months of operating costs. Annual audited accounts may be required depending on licence conditions.
Fee Disclosure Statements must be provided annually to ongoing clients, showing all fees charged and services provided during the previous 12 months. Bookkeeping systems must support accurate FDS preparation with fee breakdowns by type, service descriptions matched to fees charged, and comparison to fees disclosed in the original service agreement.
AFSL holders must report significant breaches to ASIC within prescribed timeframes. Financial record-keeping failures can constitute breaches requiring reporting. Maintain systems that enable prompt identification of any compliance issues.
Wealth management firms benefit from integrated practice management and accounting systems.
- Financial Planning Software such as Xplan, Midwinter, AdviceOS, or Wealth360 handles client records, SOA generation, and fee tracking.
- Accounting Integration: Most planning software integrates with Xero or MYOB. Key integrations include automatic fee invoice generation, revenue recognition by fee type, adviser revenue allocation, and trust account transaction recording.
- CRM Systems such as Salesforce or HubSpot track client relationships and business development activity.
- Recommended Stack: Xplan or Midwinter connected to Xero with automated fee invoicing and trust account bank feeds.
Incorrect Fee Timing
Risk Level: MEDIUM
Recognising ongoing advice fees when invoiced rather than as the service period elapses overstates revenue in billing periods and understates it in service periods, creating incorrect profit reporting and potentially misleading Fee Disclosure Statements.
Trust Account Compliance Failures
Risk Level: HIGH
Failing to maintain proper trust account records, depositing client funds late, or using trust funds for operations can result in AFSL suspension or cancellation and personal liability for directors.
Missing Input Tax Credit Restrictions
Risk Level: MEDIUM
Claiming full input tax credits on expenses related to input-taxed financial services results in incorrect BAS lodgement. ATO audits of financial services firms commonly identify this error, resulting in GST reassessments plus penalties and interest.
Not Tracking Adviser Revenue Separately
Risk Level: LOW
Without tracking revenue by adviser, the firm cannot analyse productivity, calculate commission splits accurately, or identify which advisers are profitable.
Ignoring Clawback Provisions
Risk Level: MEDIUM
Recognising full insurance commission income without provision for clawbacks overstates profit. When policies lapse, commission reversals create unexpected expenses and cash outflows.
What are the trust account requirements for wealth management firms?
AFSL holders receiving client money must maintain trust accounts separate from operating funds. Client money must be deposited promptly, typically within one business day. Trust accounts must be reconciled at least monthly with records kept for seven years. The trust bank balance must always equal total client entitlements. Compliance with trust account requirements is typically a condition of the AFSL, and breaches can result in licence suspension or cancellation.
How is GST treated on financial advice fees?
Most financial advice fees are input-taxed under the GST Act, meaning no GST is charged to clients and no input tax credits can be claimed on related expenses. This differs from GST-free supplies where input tax credits are available. Reduced input tax credits at 75% apply to certain expense categories such as audit and actuarial services. Some services such as SMSF administration may be taxable at 10% GST depending on specific circumstances.
When should ongoing advice fees be recognised as revenue?
Ongoing advice fees should be recognised over the service period, not when invoiced or when cash is received. An annual fee of $6,600 should be recognised at $550 per month as the service is provided. Fees received in advance should be recorded as deferred revenue (a liability) until earned through service delivery.
What financial requirements must AFSL holders meet?
AFSL holders must maintain minimum net tangible assets (commonly $50,000 to $150,000 depending on licence authorisations), adequate cash resources to meet projected expenses, and surplus liquid funds covering at least three months of operating costs. Some licences require annual audited accounts. Requirements vary by licence class, so check your specific AFSL conditions with ASIC or your compliance adviser.
How should wealth management firms calculate net tangible assets?
Net tangible assets equal total equity minus intangible assets. Start with total assets, subtract total liabilities to get equity, then subtract intangible assets such as goodwill, client book value, and capitalised software development costs. The result is NTA, which must meet minimum AFSL requirements. Monitor NTA monthly to ensure ongoing compliance.
Contact Scale Suite for a free compliance review or trust account health check tailored to your wealth management practice.
Disclaimer: This guide provides general information only and does not constitute financial, legal, tax, or compliance advice. Scale Suite is a registered BAS agent, not a registered tax agent. For tax advice specific to your circumstances, consult a registered tax agent. AFSL requirements and financial services regulations are subject to change. Always verify current requirements with ASIC and the ATO.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire - without the recruitment risk, training time, or full-time salary commitment.
Considering hiring finance staff?
We’ll show you the full cost of an internal hire vs our embedded team – and exactly how much you’d save.
We’ll reply within 24 hours to book your free 30-minute call. No lock-in contracts and 30-day money-back guarantee
