Some help from Canberra would be nice, says Peter Switzer.
With a host of changes set to be imposed on the financial planning industry, one of the greatest threats to its future success is our failure to demonstrate what our strengths are.
However, it is not helped by the role of the Government that refuses to understand the potential importance of everyday Australians having access to financial expertise.
More on that later. For the moment, let’s look at a number of examples that clearly show the way for both advisers and the Government.
Recently, the Australian Taxation Office revealed that there were 70,613 cases of superannuation savers breaching their limit for concessional contributions; and 48,721 will face the penalty tax for 2009-10. This is up on the 23,059 savers who copped it in 2008-09. Recall, the 2009 Budget halved the caps to $25,000 or $50,000, depending on your age.
The $150,000 a year limit for non-concessional contributions tends not to be the problem. But for those doing salary sacrifice, without an adviser’s objective set of eyes, a mistake can easily occur. And when the penalty can range from 46.5 per cent to 93 per cent, it does underline one of the many advantages that come with advice.
This is a part of our strength that many of us don’t effectively market. Too many clients see us as market experts who can generate 10 per cent or more on investments every year; but hopefully, as the relationship with a client develops, we can show there are many strings to our bow.
Not long ago, we had a possible client who was taken aback that we could not easily answer her questions without spending the time getting to know her goals and situation.
She complained that she couldn’t just come to us, as with an accountant, and simply get the information she required. And it was particularly galling for her, as accountants are prohibited from advising on the particular area she needed help with.
Sure, you could take the risk and give some limited advice; but I prefer not to risk my licence. Either I do it properly or we don’t do it at all.
By the way, that is my attitude given the Financial Services Reform Act. However, if this were changed, then I would think differently.
There have been at least two standout cases where a party wanted cheap, hourly advice, which required more than 10 hours’ work, and I was unable to help. In both cases the people in question made second-rate decisions based on greed and a lack of knowledge, but the law made it impossible to help them.
We should be free to give advice based on our judgement, which comes from our qualifications and experience. If it is proved that we advised badly – or more importantly, recklessly – then we should be prosecuted, just as an accountant could be; but something needs to be done to give Australians access to advice.
The wise step would be to make the cost of a statement of advice tax-deductible, even if it was up to a fair dollar amount – but Treasury would be dead against it. Of course, taking this step would require Government to believe in the value of advice, and I am not sure we have Canberra on this one.
This tax anomaly has meant that our industry is addicted to ongoing service, despite many customers either not needing it or not wanting it. There are many who do; but equally, there are many who don’t – wisely or unwisely.
Our commitment to getting someone signed up with financial products and paying for ongoing service has meant that many of us have not pitched for one-off business to help Australians take on one of the biggest money deals of their lives, in buying a home.
The only reason for this has to be the mindset that we are not interested in one-off customers, which is madness.
Sure, ongoing service is great and provides certainty for planning and for selling the business, but so is five years of healthy revenue coming from both ongoing payments and one-offs.
And remember, the one-offs of today could be the ongoings of tomorrow. All this industry needs is a little help from Government and a little help from ourselves!
Peter Switzer is founder of fee-for-service financial planning firm Switzer Financial Services and hosts SWITZER on Sky News Business Channel, Monday to Friday at 7pm & 10pm. Visit www.switzer.com.au or email: peter@switzer.com.au
