With the scramble of 30 June behind us, it’s now an opportune time to prepare and plan for the new year. Use this time of year to help set up your clients with the following hygiene checks.
1. Back to basics
A new financial year is the perfect time to take a health check of client finances.
Over the course of the year, we know things change. Clients may have picked up a new job, taken a sabbatical, or commenced parental leave.
These lifestyle changes will affect their financial position, and any change in income will have flow-on effects on their plans and objectives.
So an annual check-in with clients is good practice.
The first step is to establish how much is coming in. It’s not a surprise that many clients may think they know how much money is coming in, but are surprised when they crunch the numbers.
From there you can establish a budget to suit your client’s goals and objectives.
2. Lost super?
Most people may not think twice about signing up with their employer’s default fund – and that’s OK – but upon inspection, it’s worth a closer look.
According to the Australian Taxation Office, there were a total of just over six million lost and ATO-held accounts with a total value of just over $16 billion*.
Of the 14 million Australians with a super fund, 45 per cent have more than one super account.*
There is no problem with a client joining their employer’s default fund, but if they have multiple accounts, they will be paying multiple sets of fees.
This is because for every fund there are insurance costs, performance fees and management fees.
Rolling super into one account will help simplify client investments and may reduce costs.
Your client’s employer or existing super fund (any of them) can roll this in quickly and at no cost.
3. Take advantage of the caps
After your client has found their super, they may be motivated to tip more into it.
Much of the industry agrees that superannuation is the best game in town, this is because it’s taxed at a concessional rate of 15 per cent. For high income earners at the top income bracket, this can be a 34 per cent discount rate on long term investments.
It’s simple to set up regular salary sacrifice payments with a client’s employer. Just be mindful of the caps.
After all, a little bit saved today, can make a big difference in future.
One thing clients need to be mindful of is that they won’t be able to access their savings until they meet preservation age.
4. Insurance reviews – are your clients protected?
We’re often guilty of not taking care of ourselves until it’s too late.
Simple steps like having health insurance can make all the difference when a family member is struck ill. Poor health is already a stressful time for a client and their family, so any financial strain can amplify this.
There are two reasons to consider taking up health insurance, if your client doesn’t have this already.
The first is obvious. Access to health insurance provides peace of mind when a client or their family member is sick. Further, health insurance provides access to preventative offers such as general dental and remedial massage to maintain good health.
Secondly, clients may actually be saving money by opting for health insurance.
If a single client has income above the threshold of $90,000, they are charged the Medicare levy surcharge (MLS), when they don't have private health insurance.
And if they are over 31 and don’t have private health care, when they do take it up, they will be slugged a 2 per cent loading premium for 10 years after they have taken out insurance.
So it’s worth thinking about health insurance before a client turns 31.
5. Giving back
During your regular reviews, it’s worth noting that many clients already donate to charities and philanthropic organisations.
So why not engage with clients about their chosen charities, because it likely reflects their own values.
While the most common approach is to make one-off donations, a more structured and considered approach to philanthropy will have greater impact for the charity or organisation.
One of the challenges facing charities is how to manage the uneven levels of donations they receive. This is why many charities and organisations encourage monthly payment donations.
It is much easier for charities to achieve their missions when they have foresight of a known and regular income stream.
Structured payments can be built into a client’s financial plan so their charity can commit to set projects.
Although not everyone is in a position to commit to regular and ongoing payments. Regular or one-off voluntary work can still have an impact. This may even be something you can pursue with your client together.
There is diversity of choice in voluntary work, from planting at your local nursery to mentoring school students. These valuable contributions can make a big difference to the local community.
While many clients may have been scrambling to get their finances in order to claim a deduction before 30 June, they may benefit now from a nudge to review this new year’s finances.
Engaging with clients early and often will help clients plan for their best financial future in 2016-17.
*ATO figures as at 31 December 2015, Super accounts data overview
Bryan Ashenden is head of financial literacy and advocacy at BT Financial Group
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