Making initial advice tax-deductible would be a “no brainer” move by the Government to encourage people to seek advice.
Jonathan Wu, executive director and senior financial adviser at SWU Invest, which recently set up an online investing service, said the burden of compliance on firms was not understood by the Government.
Ahead of the election, Wu said he had not yet seen any proposals from the Government or opposition that he felt would improve the financial advice system.
“Compliance is the biggest challenge and it is impacting firms’ bottom line, the number of people leaving the industry is astounding and the Government is not something concrete.
“How can ongoing fees be tax-deductible but not initial fees. It is a no brainer move, it would be such an easy win and encourage people to seek advice.”
He said people were still reluctant to seek advice or failed to appreciate its value and if they held off from seeking advice until retirement, this left them with minimal options to take.
“There’s a portion of people who can’t afford advice and a portion who don’t understand its value. People don’t think they need financial advice until retirement or a life event triggers them to seek advice, it isn’t a life-threatening issue for them, but then they are stuffed as they can’t do much with their superannuation. People are not starting early enough and they could be using things like downsizer contributions.”
He hoped the SWU Online Invest service would help people who were reluctant to seek advice by offering them a managed portfolio.
“There are a lot of people who have generated a lot of cash during the pandemic and they are the demographic that won’t seek advice because they can’t afford it or don’t think it is valuable. They will only likely believe in it when they receive the transfer of wealth from their parents.
“Hopefully our service will be an opportunity for them to get on the front foot and receive guidance.”
Comments
Yes, compliance is the biggest challenge. Yes, too many Australians are worse off because they aren't getting professional financial advice. But tax deductibility is not the solution. Nor is "roboadvice" or "regtech". Nor is promoting financial advice as a career to students.
The biggest issue weighing down professional financial advice is BAD REGULATION. The only practical solution is fixing the BAD REGULATION. Everything else is just fiddling while Rome burns.
Hume, O'Dwyer, & Frydenberg have had years to address this problem and have only made things worse. Unfortunately it seems the only hope for fixing BAD REGULATION is a change of government.
Making upfront fees tax deductible will do nothing to help people access advice, as any adviser worth their salt is already at capacity, or will be soon due to the exodus. Sure it would make it cheaper for people upfront, but the government would be effectively offsetting part of the cost of their own stupid and unnecessary legislation.
If they want to make a difference, it's pretty simple:
1. Scrap SOA's for all advisers not employed by a product manufacturer or where no commissions will result from the piece of advice. No other profession is required to write these documents. Clients don't want or need them. This is the biggest cost of all!
2. Include financial advice as an ancillary purpose in the SIS Act. It makes sense, and will clear up some of the stupidity going on at the moment with super funds reviewing SOA's etc. Consumers can access their super for cosmetic surgery for god's sake, but not financial advice which will improve their retirement outcomes? What nonsense.
3. Refine Opt-In/FDS so it is a simple one-pager which can be signed prior to 365 days, generated by the platforms or adviser software (ie. add some flexibility re the date for past fees), and accepted by platforms and all licensees.
It's not rocket science. This is basic stuff which absolutely makes sense. The costs would drop and advisers may stop leaving and some may even return to the profession. It wouldn't cost the government a single bloody cent, they would earn more tax revenue and they would win the votes of advisers and their clients back.
Unfortunately the Coalition are too dumb and beholden to product manufacturer vested interests to do anything useful like this.
@Anon,
If you think voting for the opposition will improve the situation for advisers, well you've got to get off, ....smoking the weed.
In every so-called policy spiel propagated by the Labour Party, the only thing I've ever heard is, how can we get rid of the pesky conflicted advisers that are not employed by the union based industry funds.
Pick any era you like, and then count the ways !
You can't be so deluded that neither the government nor the opposition have any intention of changing their positions.
If anything, I would suggest the opposition will make it even tougher for many to continue.
The simple reason is, neither parties care !
Do you think before the various bits of legislation and compliance had ever seen the light of day, the government, the opposition or the regulator (ASIC) would have consulted with many reputable folks who work in the industry first, to understand what we do on a day to day basis ?
It's a rhetorical question.
They were not interested and you don't need to be a rocket scientist to figure that out.
IMHO making initial financial planning advice tax deductible is the solution. The public, government and regulators do not have an appetite for reduced compliance and regulation because of the potential blow back. Therefore, making advice deductible is the only viable way forward if you’re deciding how to make advice more affordable.
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