Is $310,000 per annum the new minimum average family income required for Financial Advice?

In our previous blog post 'How much does the average family spend in Australia?' we did a deep dive into the spending habits of the average Aussie families.

We analysed that the total average expenses were:

Total Fixed Bills	$58,498
Home Repayments / Rent	$58,630 *
Total Variable Bills	$23,339
Discretionary Expenses	$28,045
Holidays & Travel	$11,650
Total Expenses	$180,161

*This is the average mortgage figure when you remove those that have already paid off their home loan, most commonly retirees.

Therefore, to be able to afford an 'average' life, without any savings capacity, you would need to make $90,000 net per member of the couple or $120,000 before tax per person.

However, to maximise the benefit from Financial Advice it is typically recommended that you have a savings capacity of 20%. That way you have sufficient surplus cashflow for us to advise on strategies regarding paying off your mortgage quicker, investing, making additional super contributions etc.

Therefore, to create this surplus of $46,000 per annum (20%), you would need a total net income of $226,000, which means before tax, each member in the couple would need to earn $155,000.

As income tax is calculated per person, rather than per family, to achieve a net income of $226,000 on one salary (for instance due to parental leave), that sole income earner would need to earn a considerable pre-tax salary of $380,000 per annum.

Now, it is important for me to make many caveats:

1. Income levels are more important/relevant for accumulators (typically people aged 30 to 50) who are wanting ongoing, holistic advice. We have helped many people in the pre-retirement phases from age 50 with lower incomes because they often have greater super balances, lower mortgages expenses and there are more tax effective superannuation strategies available to them after age 60.
   

2. You may be spending less than the average. In this case you may be achieving a solid surplus cashflow target, without the need to earn as much as some others would. It is also possible to help clients push from a lower percentage saving rate to a higher one via cashflow coaching.
   

3. Many people can benefit from situational advice, without needing these levels of income. These types of advice may include receiving an inheritance or another type of lump sum, planning through a divorce, receiving personal injury/insurance proceeds, going into aged care, setting up life insurances for your family and much more.
   

4. For families below this income level, often the best service level for both client and adviser is to complete a one-off financial plan. That way clients can be set up with Goals Planning and Modelling, Cashflow, Superannuation, Insurance Advice and much more, without the need to pay an ongoing fee when their surplus cashflow may not benefit from it.

$310,000 per annum is of course an arbitrary number (albeit using the best average data possible) and we know that clients of all shapes, sizes and income levels perceive financial advice value in different ways.

There are many clients who may earn less than this figure and are happy to pay several thousand a year in Financial Advice fees for clarity, peace of mind and to improve their financial wellbeing.

However, this figure acts as a useful benchmark for advisers to understand the types of clients that have the surplus cashflow to unlock greater financial strategies and will undeniably benefit relative to the fee.

If you're a family earning above $310,000 per annum, but are struggling to save or make progress you can:

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