The Investment and Financial Services Association (IFSA) has made a call to make the cost of financial advice fully tax deductible.
IFSA’s call was made as part of its submission in a hearing at the Parliamentary Joint Committee Inquiry into Financial Products and Services in Australia (Ripoll Inquiry).
New IFSA CEO, John Brogden, remarked that maximising access to financial advice is integral to increasing retirement incomes for working Australians, and that all fees for financial planning should be tax deductible to improve access to this advice:
“Indeed, millions of Australians who need advice don’t get it now because of the cost. IFSA believes that increasing access to affordable advice is critical,” said Mr Brogden, who added:
“Providing tax deductibility for all financial advice is essential…
“Providing tax deductibility for all financial advice is essential in ensuring that investors are able to effectively exercise choice in how they pay for their advice – be it up-front or ongoing.”
At the same time, the Institute of Chartered Accountants has also called for tax deductibility of financial advice fees, referring to fee-for-service advice only:
“Allowing deductibility for fee-for-service advice is a necessary step for securing greater trust between financial advisers and their clients. This contributes to the professionalism of the industry,” said ICA CEO Graham Meyer.
Tax concessions for fee-for-service financial advice are vital to reducing the industry’s reliance on commission based remuneration models
Relating tax deductibility of financial advice to the debate over fee-for-service versus commission remuneration, Mr Meyer added, “Tax concessions for fee-for-service financial advice are vital to reducing the industry’s reliance on commission based remuneration models.”
Tax deductibility of the cost of financial advice also forms part of the FPA’s platform, CEO Jo-Anne Bloch pointing out that the FPA has also called for tax deductibility of fees in its Ripoll Inquiry submission, in its Budget submission, and in every other FPA submission to Government in the past few months.
Ms Bloch said the FPA believes that full tax deductibility on the cost of financial advice is integral to moving to a fee based environment, and it will also put financial planners on a par with accountants.
The AFA also supports the concept of tax deductible financial advice, with AFA CEO Richard Klipin stating the AFA supports any initiative that will make financial advice more accessible and affordable.
Interested advisers and others should note that The Chairman of the PJC Inquiry into Financial Products and Services, Bernie Ripoll MP, Federal Member for Oxley, has been confirmed as a speaker at both the 2009 AFA Conference on the Gold Coast from 4 – 6 October and at the 2009 FPA Conference in Melbourne, from 18 – 20 November.
As much as I agree that fees should be tax deductible in line with tax legislation for other deductions(not because it is a good idea overall) it looks like another push toward the fee for service model. What is there to stop planners just raising their fees and making a windfall of this? Maybe a standard maximum hourly fee needs to be included, as well as a panel to decide the fees chargable for any advice as lawyers do for estates, otherwise the tax man might just be funding the retirement of planners. As far as tax deduction making this more affordable, it will do nothing for the vast majority of Australians who will still not be able to afford fee-for-service advice.
Are not fees deductible now when incurred in the act of investing to produce income or capital gains?
Bill: 80% of the work financial planers do for their clients is behind the scenes, so not easy to calculate. Its not as easy as the 10min doc appointment. It is actually very expensive sadly to actually provide advice both from the time taken to do due diligence, the paperwork and in fact to do it properly. Capping fees is not commercial. It is not a monopolistic industry and as such the real price is quite realistic.
James: Yes, ongoing adviser fees are currently tax deductible while initial fees arent.
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