Federal Budget: Financial Advice Fees Tax Deductible

Will the 2020 Federal Budget be the year that one-off and initial financial advice fees become tax deductible? So many people need financial help and guidance as we fight our first recession for 30 years...they just need an incentive to take the first step to getting that help.

For the vast majority of Australians, the recession creates uncertainty and fear around finances with the result that we shift to a 'save, don't spend' mentality as a community, a mindset driven by fear of the worst; a loss of optimism, and sometimes the bite of financial reality as the spending habits of the past come home to roost.

Several studies in Australia over the last decade have concluded that people receiving financial advice end up better of both financially, and emotionally. In short, they're happier. I'm not glossing over those that didn't get good advice or the service that they were promised and are being refunded fees from the large institutions, but the data proves that most people with an adviser are not only happy with the adviser, but in fact are prepared to introduce friends and family to their financial adviser.

Let's look at all the steps that have been taken to professionalise financial planning over the last few years...

• Professional Standards exam in place (Tick)
• Degree Education or Higher minimum education standard (Tick)
• Must uphold the FASEA Code of Ethics which goes significantly above the minimum legal standards to provide advice (Tick)
• Fees/Subscription to the Australian Financial Complaints Authority compulsory (Tick)
• Professional Indemnity Insurance in place (Tick)
• Institutions mostly out of financial advice thus the fee you pay is for the advice, not to be sold a particular institution's product (Tick)
• Every authorised financial adviser is listed in ASIC's Financial Adviser register so that you can examine their track record (Tick)

Financial advice has gone through a well needed generational shift. It has meant that the cost of getting advice has increased. We should all be clear about this: good advice is not cheap at the time it is received, but it can make a lifetime of difference to the quality of your life. Good advice changes the confidence with which you spend, save and invest money. Good advice changes your relationships with parents, spouses, partners, kids and grandkids.

Good advice changes your relationship with the money itself often undoing decades of mental anguish, uncertainty, even guilt and shame, and replacing it with the feeling of freedom to enjoy yourself whilst retaining an essential sense of security that you can afford your lifestyle.

A tax-deduction helps to make the fee more affordable

Now is the time for the initial fees for financial advice to be made tax-deductible so that thousands more Australians can stop themselves from financial mistakes like:

• taking $10k out of super when they didn't need to, and with the result it will reduce the quality of their future retirement
• borrowing money to invest in the share market (especially buying when its up and then selling when it is down)
• blindly accepting exposure to sharemarkets in their super without knowing that's what the fund is doing with their money
• missing out on Centrelink support because they don't know how the rules get applied - whether that is JobSeeker/JobKeeper or exploiting age differences in married couples nearing retirement
• working for years longer than they have to instead of retiring and enjoying life through fear of running out of money
• not putting tax-deductible insurance in place that will replace their wages when shite happens in life
• leaving old wills in place after they divorce...and having their money go to the ex and his/her new squeeze
• Putting kids in Private Schools the parents can't afford
• Staying invested in Cash when interest rates are almost zero for fear of every other alternative they could invest in
• and the list goes on, and on, and on.

So here we are leaning in to the first recession in 30 years whilst trying to avoid the health, and more so, the financial ravages of the Covid-19 pandemic. The financial challenges our communities face will be dire for some, and tough for others...and we will hear from the government that, "We need to get out and spend, to have confidence that we can all turn the economic fortunes of our country around".

The battle for economic recovery begins with shifting the psychology of our communities, not Government handouts.

The government must help Australians gain the financial confidence to get the country growing again.

The 2020 Federal Budget is the right time to make the initial fees on financial advice tax-deductible so that Australians have the financial incentive to go and get financial advice that can shift their money script.

It is financial advice that can give people the certainty that they crave before they will be willing to invest for their future, and to again start living a life full of great experiences.

Shifting consumer psychology is what can kickstart our economy more efficiently than government spending.