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The Pitfalls of One-Off Financial Advice

Clients will sometimes ask "Why do I need to pay for ongoing service and advice, can't I just follow the initial plan?"


A Picture of signs indicating different options for Financial Advice

Whilst many Advisers (including us) do offer one-off Financial Plans in some circumstances, it is important to explain the reasons/benefits of ongoing advice:


  • Being able to adjust the Financial Plan to changes in client circumstances and goals & objectives over time (in our experience most families experience a life changing event every 24 to 36 months).

  • Having an impartial professional keep you accountable and on track to reaching your goals (which often involves hitting targets such as cashflow savings or business performance).

  • Being able to delegate the time, stress, mistakes, expertise and education around your Finances to a professional. As the saying goes, 'you don't know, what you don't know'.

  • Navigating consistent changes to the economy, investment markets and government regulation. In this article, I want to hone in on some of the past changes that have meant people have had to change the trajectory of their financial plan.



Financial Year

Change

Impact on Financial Plan

2025/26

From 1 July 2025, the Government has proposed an 'additional' tax of 15% on earnings on an individual's superannuation benefits over $3 million at the end of a financial year.

For clients who's balances are projected to go over this threshold, it may be worthwhile changing the strategy to start investing in other tax entities/names. This cap is designed to be non-indexed so it will end up affecting a lot of people in the future as $3m will only be worth $1.35m to a 30 year old today by the time they are 60.

2024/2025

Stage 3 Tax Cuts will benefit all:

  • $181 per month (if you are on $100,000 p.a.)

  • $310 per month (if you are on $150,000 p.a.)

  • $377 per month (if you are on $200,000 p.a.)

Whilst this is mostly good news, it means that any tax deductions such as on investment properties, super contributions etc. become less effective relative to using them in 2023/24 and therefore could change the Financial Planning Strategy.

2023/2024

Interest rates remain consistently high and new land/Airbnb taxes are proposed

Clients with investment properties are faced with extremely difficult decisions as to whether to sell their properties that are often extremely negatively geared given high interest rates (costing them a lot more in expenses than they are receiving in rent) or try and hold on, requiring sound advice from Financial Planners.

2022/2023

Extremely high inflation affected the cost of everything.

The cost of clients goals and living expenses were now far higher and their savings capacity much less. This had a substantial impact on their wealth projections and required revisiting the overall strategy.

2021/2022

The bond market collapsed as interest rates went from historic lows to above average very quickly.

This had a disproportionate affect on the account balances of retirees who often have a greater portion in fixed interest products. However, for those clients that had a well diversified portfolio and suitable drawdown strategy by working with a Financial Adviser were much better off.

2020/2021

To make Income Protection Insurance more sustainable, APRA forces insurers to make their insurance policies 'weaker' by October 2021.

Financial Planners did their best to ensure their clients had income protection under the more favourable older style policies.

2019/2020

COVID occurs and in March 2020 most investment markets dip by 20-40%.

Financial Planners helped educate clients to stay invested (rather than selling at a loss) and fast forward to today, most markets are at all time highs.

2018/2019

Carry Forward (Catch Up) Contributions are permitted and can begin to accrue for the next 5 Financial Years.

This strategy can be extremely effective for those with super balances below $500,000 who are high income earners, preparing for retirement or looking to reduce a Capital Gains Tax Bill. Most advisers began to add this strategy to the overall plan for their ongoing clients.

2017/2018

In one of the biggest changes to superannuation, a maximum $1.6m (indexed) cap was introduced on Tax Free Pension Accounts

For clients in excess of this threshold, residual assets had to be transferred back to accumulation stage. This limit also greatly affected the Financial Planning strategy of pre-retirees in future years.

As you can see, there are always significant changes to the economy, investment markets and government legislation that require sound Financial Advice each year. What could be next? If I had to guess, some changes could include:


  • Given mounting government debts and Labor being in power could mean Negative Gearing and Capital Gains Tax discounts could be reduced to eliminated.

  • Some form of inheritance tax could be introduced to tackle government debt and inequality.

  • The family home becoming an 'assessable asset' for age pension purposes.

  • Tax incentives for people to move outside of high density cities like Melbourne and Sydney.


Now, imagine you are prospective client back in 2017. It couldn't be possible for either a Financial Adviser to create a Financial Plan to navigate all the legislative or economic changes to come in the next 7 years, nor would it be possible for a client to tackle them all themselves. And, therein lies the power of ongoing Financial Advice.

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