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Australia
Melbourne, 8 April 2008

Mercer Wealth Solutions has called on the Federal Government to consider new measures that will increase community access to financial advice to help close the retirement funding gap.

Australians who seek financial advice are generally better equipped to reduce personal debt, improve financial literacy, increase retirement savings and protect their wealth than those who do not.¹

Mercer Wealth Solutions believes the Federal Government should study the feasibility of introducing new measures, such as a tax offset or making all forms of financial advice tax deductible.

Mercer Wealth Solutions’ Financial Advice Leader, Scott Walters, said either approach could “remove a tax disincentive and thereby lower the cost barrier to obtaining comprehensive financial advice. This would inevitably encourage more people to seek assistance and take responsibility for any retirement funding shortfall”.

“Australia is a world leader in advancing self-funded retirement, where individuals carry the savings responsibility. A logical step in the evolution of this approach is to provide a tax offset or allow consumers to claim a tax deduction for all financial advice and plans,” Mr Walters said.

“It can cost consumers anywhere from $1,500 to $10,000 for the development of a comprehensive personal financial plan².  A tax offset of up to $1,000 on this expense, for example, would be worthwhile provided its impact was assessed carefully through a feasibility study,” he added.

An alternative approach, tax deductible financial plans, was flagged by Financial Planning Association (FPA) Chief Executive Officer Jo-Anne Bloch in November 2007³. While tax payers may claim a tax deduction in some situations, they may not in other circumstances.

“Tax payers can claim a tax deduction for financial advice where it relates to the generation of income, but not for initial financial plans and upfront advice, some ongoing advice, super advice and estate planning advice. There’s an opportunity to improve access by making more forms of financial advice a tax deductible expense,” Mr Walters said.

Mr Walters said a tax offset for financial advice might encourage those less financially literate to seek out help from a professional financial adviser.

“A Mercer Wealth Solutions study found respondents rated with the highest level of financial knowledge projected their super balance at retirement to be about five times greater than the least knowledgeable group⁴. Measures to boost financial advice uptake would be good for anyone in the community saving for their retirement or seeking greater knowledge of personal financial matters,” he said.

Mercer Wealth Solutions already provides limited phone-based financial advice to approximately 600,000 Mercer super members as part of its service.

Mr Walters said Mercer’s corporate clients were “strong supporters” of this service because it “gave employees a value-adding benefit they might not normally be able to access on their own”.

Mercer Wealth Solutions supports industry discussion on making comprehensive financial advice more accessible for a greater number of consumers.

1. Mercer 2006 Financial Literacy and Retirement Readiness Study, p.20 to 23. The most financially-savvy respondents were more likely to have consulted a financial adviser.

2. Rice Warner Actuaries, Value of Advice, a report prepared for the Financial Planning Association, February 2008, P. 5

3. ‘Which direction home?’, by Simon Hoyle in Professional Planner, February 2008, p.18

4. Mercer 2006 Financial Literacy and Retirement Readiness Study, p.21

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