Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
‘Complex’ regulatory changes driving technical adviser queries
Financial advisers are most commonly seeking technical help on a handful of important regulatory updates that affect pre- and post-retiree clients according to recent research from Westpac’s BT.
New income thresholds for seniors health cards, downsizer rules, the transfer balance cap, changing work test requirements and the Home Equity Access Scheme are the five most common problem areas identified in a release from the wealth provider, which regularly surveys its technical team to ascertain the issues giving advisers the most trouble.
The income thresholds for seniors health card will increase dramatically – from $57,761 to $90,000 for singles and from $92,412 to $144,000 for couples – and, if the bill before parliament is to pass, should see an extra 44,000 Australians qualify for it. Accordingly, advisers are keen to confirm parameters on the rule change for their clients and the parents of their clients.
“Becoming eligible for the Commonwealth Seniors Health Card gives you access to valuable concessions, such as cheaper medicine under the Pharmaceutical Benefits Scheme,” commented Tim Howard, BT technical consultant. “Visits to the doctors can potentially be bulk-billed and people can receive a refund of medical costs when they reach the Medicare safety net. Additionally, card holders may also receive economic support payments which were worth $1,000 across 2020 and 2021.”
A large tranche of extra pre-retirees will also be eligible for up to $300,000 downsizer contributions when the eligibility age is dropped from 60 to 55 in the coming months.
“Advisers with clients who are about to turn 55 years of age, and are planning to sell their home, may wish to consider the timing of the legislation,” Howard said, adding that the legislation is currently in parliament and is expected to come into effect in either October this year or in January 2023.
Advisers are also queueing up to ask about the government’s Home Equity Access Scheme (HEAS), which allows pension-age Australians to access equity in their home. Participants may take a lump sum payment, pension or a hybrid as part of more flexible scheme arrangements.
Additionally, the transfer balance cap is expected to increase from $1.7 million to $1.8 million if current forecasts for the CPI are accurate, which will see retirees able to transfer a greater chunk of wealth into tax free retirement income streams.
“High net worth individuals who aren’t in a hurry to start a pension may want to hold off until then,” Howard said. “However, it’s worth noting that, with Australia’s inflation reaching its highest level in over 20 years, there is a possibility that the federal government could freeze the indexation of certain thresholds such as the transfer balance cap.”
One of the most technically challenging areas of concern, BT reports, is changes to the work test arrangements that will see more people eligible to contribute between the ages of 67 and 74. Instead of needing to work 40 hours in a 30 day period, people can still make a personal deductible contribution if they met the work test in previous financial year and they have a total super balance of less than $300,000 – assuming they haven’t already used the dispensation.
“In addition to these five popular topics, the Quality of Advice Review is top of mind for advisers; and the industry is anticipating potential regulatory changes to flow out of the recommendations,” Mr Howard said.
