On for young and old

The 2017 Federal Budget contained several proposals that will raise people’s engagement with their super. When contrasted with the 2016 Federal Budget, the changes in the most recent Budget were not of a similar magnitude. Nevertheless, some changes will increase the level of engagement certain types of clients have with their super. The proposed changes have more of an effect on both young and old people, with middle-aged people being somewhat left alone. This presents advisers with a great opportunity to focus on nurturing a pipeline of younger clients and to continue demonstrating their value to their older clients.

First home super saver scheme will boost super engagement

This scheme will help people save for their first home by using their super account to build savings for a deposit in a tax-advantaged environment. People can contribute a maximum of $30,000 over two years and this can be a mixture of concessional and non-concessional contributions, although the new concessional cap of $25,000 per year still applies. This change will increase people’s engagement with their super because they are allowed early access to their money. This will sharpen their focus on super because the result of their saving and investment decisions will have an effect on their wellbeing in years and not decades. This behaviour is well-described by psychologists and is referred to as present bias. Despite the saver scheme being limited to only $30,000, people will transfer the lessons they learned when thinking about their home saver account to their broader super account. A client who is more engaged is likely to make better financial decisions and to follow a plan more diligently, resulting in better outcomes, which leads to a higher likelihood of you receiving more high-quality referrals from satisfied clients.

Older homeowners likely to seek advice when downsizing

Starting from July 2018, homeowners aged over 65 will be able to contribute up to $300,000 of the proceeds from selling their home into their super without affecting their lifetime cap of $1.6 million. To successfully navigate this policy it’s very likely that people will seek financial advice because the process is quite complicated. While older people may not always be the most attractive type of client for an adviser, it does provide an entry point for an adviser to build relationships with other, younger, family members. In addition, it could also present advisers with an opportunity to demonstrate their expertise in dealing with other financial advice issues, including aged care and social security.

Complexity continues to increase

In the eyes of clients, one of the major benefits of using a financial adviser is their ability to explain and navigate the often complex rules that exist in super and social security. The level of complexity is steadily increasing, raising the perceived value of a financial adviser from a client’s perspective. A related opportunity that is fostered by complexity is providing financial advice to multiple generations of the same family, as it is now common for three generations of a family to all be clients of the same adviser. This means advisers need to consider using platforms that offer fee aggregation and fee capping when they have multi‑generational clients in the same family.

We have written a booklet titled, ‘A look at intergenerational planning, advice and opportunities’ (to download the paper provide your details in the form at the bottom of the page). This paper will give you a practical framework that can help you better understand and foster potential intergenerational advice opportunities.

The information contained in this newsletter is provided on behalf of the IOOF group of companies and is intended for financial adviser use only. It is given in good faith and has been prepared based on information that is believed to be accurate and reliable at the time of publication. Any examples are for illustration purposes only and are based on the continuance of present laws and our interpretation of them at the time.