Do you feel like you are running out of time to build a comfortable nest egg for your golden years?
Obtaining financial advice does come with a cost, and it’s important to acknowledge that fact.
Professional guidance on managing finances, making wise investments, and planning for the future can require a significant investment of thousands of dollars. Yet, it’s crucial to understand that this expense can be an incredibly valuable one.
By investing in financial advice, you are making a proactive decision to work towards your financial goals and ultimately secure your financial well-being. This professional guidance has the potential to provide you with the necessary tools and strategies to make sound financial decisions, ultimately saving you money in the long term.
According to a report by KPMG, the average cost of financial advice in Australia is $3,660. This includes the cost of initial advice and implementation fees in the first year.
The cost of the advice may vary depending on its type, scope, and complexity. Additionally, you have the option to choose once-off advice instead of a yearly fee for reviews and support. However, it’s important to note that by opting for once-off advice, you may potentially miss out on valuable opportunities to update your strategy in the event of industry rule and regulation changes.
While it may seem like a lot of money to pay for advice, it can generate significant benefits for you over time. For example, a financial adviser can help you:
Save money on taxes: A financial adviser can help you optimise your tax position by using strategies such as salary sacrificing or making deductible contributions to save for retirement. This can reduce your taxable income and increase your after-tax returns.
Grow your wealth: A financial adviser can help you choose the best investment options that suit your risk appetite, time horizon, and goals. They can also help you diversify your portfolio, optimise your returns, and minimise your fees and charges.
According to a report by Russell Investments, a financial adviser can add up to 5.8% per year to your investment returns.
Plan for retirement: A financial adviser can help you plan for your retirement by helping you estimate how much you need to save, set up income streams, apply for government benefits, and protect your assets.
To comply with the FASEA code of Ethics, advisers in Australia must be able to demonstrate that the fees being charged are fair and reasonable for the services and benefits to a retail client.
Let’s take a look at the positive impact of advice through the example of Alice.
Alice is a 40-year-old earning $100,000 per year.
With $200,000 in her superannuation account and $50,000 in other investments, her goal is to retire comfortably at 65 with an annual income of $90,000.
After considering Alice’s individual needs and preferences, her adviser recommended regular pre-tax super contributions and a switch to a higher growth investment option for long-term benefits. This strategy not only reduces her income tax but also increases her potential earnings for retirement. With these changes, Alice is on track to achieve her retirement goals and enjoy the lifestyle she desires.
| Scenario | Without Financial Advice | With Financial Advice |
|---|---|---|
| Taxes Paid Per Year | $24,497 | $23,097 |
| Investment Return | 7% per year (default option) | 10% per year (high growth option) |
| Age Pension at Retirement |
$24,770 per year
Estimated using future indexed income and asset limits |
$16,620 per year
Reduced due to having higher assessable assets |
| Superannuation Balance at Retirement | $1,021,282 | $2,264,382 |
| Total Retirement Income | $84,770 per year | $125,620 per year |
Two very straightforward changes can make a significant difference.
Summary of benefits
By seeking financial advice, Alice pays $3,660 per year in exchange for saving $1,400 per year on tax, earning an extra $6,000 per year on her investments (plus compounding interest) and receives an extra $40,850 per year in retirement income. By seeking regular reviews, Alice can also stay on top of any changes to legislation or market conditions that might have an impact on the success of her plan.
Fees versus benefits
Over 25 years until retirement, Alice invests $91,500 in ongoing financial advice and reaps a remarkable $1,243,100 in net benefits. Seeking financial advice greatly boosts her overall financial situation.
Did you know that your superannuation fund can cover the cost of financial advice?
That means you can use your pre-tax money in superannuation to pay for advice rather than dipping into your after-tax funds. Just make sure the advice is related to your superannuation or retirement planning.
If you are interested in paying for advice fees from your superannuation account, we can help you to check with your fund to see if they offer this option and what are the terms and conditions that apply. We will also consider the impact of paying for advice fees from your account on your superannuation balance and retirement income.
In conclusion, financial advice is a valuable investment that can save you time and money in the long run. Seeking professional guidance on managing your finances, making smart investments, and planning for the future can help you achieve your financial goals and improve your quality of life.
Please seek personal advice before acting on any of this general information above as this is not tailored to your individual circumstances or needs.
Source: