By Kimberley Gittoes, Senior Relationship Manager at Midwinter

Technology can provide a much-needed efficiency boost to help advisers stay on top of their workload, and with Midwinter’s 2022 EOFY offer*, now is a great time for practices to take a second look at their financial advice software.

Advisers know the march towards the end of the financial year can be hectic.

Many clients traditionally consider implementing tax-effective strategies such as boosting their super contributions ahead of June 30, but it’s also a time to consider how clients are tracking towards their overall financial goals.

Markets have been volatile and uncertain amid rising inflation, the Ukraine-Russia war, and the ongoing fallout from the pandemic. Many clients are becoming concerned about higher food and petrol costs, as well as home loan interest rates, which are predicted to rise substantially over the next one-two years.

Add in a change of federal government for the first time in a decade and advisers have a lot to talk about with their clients.

While not all of the average 200-plus clients each adviser now manages will need EOFY advice, fitting those that do into a meeting schedule can be difficult. Unfortunately advice clients rated their advisers’ review service as their worst performing area, according to the 2022 Future Ready IX advice report.

The EOFY should be seen as an opportunity to touch base with clients and make sure they are on the right track; technology provides a way to do this efficiently.  

Prepare clients through virtual channels

Building personal rapport is always time well spent with clients. However, clients who take the time to consider their financial position and goals beforehand can lay the foundation for a better meeting.

Encourage clients to use advice software to improve engagement and prepare ahead. Those clients who are not comfortable filling in an online Fact Find can still use financial calculators to get a sense of their current position and how it relates to their goals. They may be surprised how much it can change over a year, which prompts new discussions about savings or retirement.

While many clients started with in-person adviser meetings, a growing number are now just as comfortable online.

Some clients even prefer online meetings as they don’t have to make extra time to come into an adviser’s office – it’s good practice to offer the choice to every client. If even a small number prefer online meetings, it can save time.

Review retirement goals, not just super contributions 

The lead in to June 30 is the perfect time to re-assess how clients are tracking against their retirement goals given many will already be considering voluntary contributions.

A voluntary super contribution can help manage a client’s overall personal tax obligations, but there are many other factors at play.

A rising interest rate environment presents a new headwind for future equity and bond returns compared to historic levels.

Potentially higher inflation and lower investment returns over the next few years should serve as a prompt for clients to reassess their retirement goals – will they need to save more or re-consider the level of investment risk they are taking on?

Younger investors may be in a different position, with superannuation guarantee contributions (SG) set to increase. The SG moves to 10.5% on July 1 (and 12% by 2025), which will raise final retirement incomes.

Rising cost of living: an opportunity for budgeting services

Inflation is now tracking at its highest rate in more than a decade, prompting the Reserve Bank of Australia to start raising rates. It has come as a shock to many Australians after the RBA initially said it wouldn’t raise rates until at least 2024.

Many clients will now need to adjust their lifestyles to cope depending on their life stage. Homeowners can expect significantly higher mortgage rates over the next two years while pensioners on fixed incomes may also have to consider cutting back.

Advisers have traditionally shied away from budgeting services but it is increasingly playing a role in holistic, goals-based advice.

Some advisers are offering specific fee-for-service budgeting by asking their clients to fill in spreadsheets or analysing their spending using software.

Advice software can also incorporate calculators to help clients manage their cashflow and providing them with a view into their financial situation in between adviser reviews.

Legislative changes and a new government

The 2022 Federal Budget was light on major changes but did include several small tweaks for clients to consider.

The lowered minimum pension drawdown rate has been extended into 2022-23, allowing retirees who don’t need to withdraw money to keep it in the tax-advantaged super environment. People approaching retirement age can now make voluntary super contributions without having to meet the work test and the downsizer contribution scheme is open to those aged over 55 rather than over 65.

The new Labor government is also planning policy changes that will have an impact on many clients’ financial situation, such as raising the childcare subsidy to 90% for the first child in care and taking up to 40% equity in up to 10,000 first home buyer home purchases a year.

Advice platforms should be kept updated with any new legislation so advice calculations are always up to date; if they are run in the cloud these updates will be available automatically for software users.

Australians are becoming more financially savvy than ever and, after two years of grappling with a pandemic, they’re keen to enjoy life. Advisers who use technology well are set to play a crucial role in helping them achieve their goals through a challenging market environment.

*With the 2022 EOFY offer, advice practices get 2-months access to Midwinter’s financial advice software, basic data migration and a 1-hour training session at no cost. Register interest here by 30 June 2022 to be eligible. Terms and conditions apply and can be found here.

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