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A Good Financial Planning Business is Like a Think Tank (We Pull the Data and Give You the Best Directions)

Recently, we got thinking about all the different legislation that affects us as well as our clients. Legislation such as the Tax Act is essentially just thousands of pages of words. We think that good advisers shouldn’t just be aware of these laws and what they do, but they should actually be discussing and researching how it will affect their clients – in the same way that a ‘think tank’ does.
 
We want to utilise legislation around tax and superannuation to get the best outcome for our clients. Picture a sausage maker – you put all the ingredients in at the top and it produces a nice, neat link of sausages for you. This is what we do, except with legislation – similar to a think tank, where you have a group of people sitting around a large table discussing a significant concept. Everyone has a different perspective, and thus various ideas and thoughts arise. The group brainstorms and, over time, get the answer that’s best.
 
When clients go to see their financial adviser, they don’t just want data. Data is easy to find and hard to unpack. What clients want is for their advisers to be able to tailor this data to their needs, so that the complexity of the decision making, and the time involved is done by someone else; a professional in this field. 
 
We once had a Zoom meeting with some new clients who are a couple, aged 58 and 59, and keen to fully retire soon. The woman is already retired, and her husband is soon to retire. They have a property on which they run a business that is owned through a self-managed super fund. First, we talked to them about their goals and after looking at their information in detail we were able to tell them that in their current financial state, they would be able to retire and live the lifestyle they want. That is, they are financially on track to where they should be. After looking at their financial standing we were able to advise that they could switch to a 0% tax income stream from their super (if they both fully retired permanently), because both had reached their preservation age. Then we helped them with a strategy for selling their property. Legislation on selling property varies with age and other factors, but in this case, we were able to save this couple over $100,000 in Capital Gains Tax — a saving they wouldn’t have been able to make if they were slightly younger and pre-retirement. By looking at all the factors and considering legislation, we were able to give personalised advice to make the most out of their scenario.
 
Here’s another hypothetical example we discussed recently. Couple A is running a business and has five years to go before retirement. They own the property where they are running the business. One possibility for them would be to sell it as a commercial property, then lease it back for the remaining five years. Assuming they meet the requirements, they would be able to get some Capital Gains Tax exemptions. In fact, given they are a couple, they could put over two million dollars from property sales into their super funds, reducing CGT to 0. Additionally, selling the property before retirement might give them extra peace of mind, and will be one less thing to worry about when they stop working. It’s scenarios such as this one that Michael and Dallas are always ‘think-tanking’ together and discussing the various possible scenarios, so that when the time comes to apply them to each client, they can tailor strategies to each client’s individual needs.
 
The financial reports that clients receive from us consider the long-term goals as well as the short-term goals. We don’t just look at what to do now, but also what to do next financial year, when you turn 60, when you retire and so on. We need (and like) to think about each step so we understand the bigger picture and can then use a more holistic approach.
 
Of course, this think tank system requires time. Many financial advisers are too busy, or have too many clients, to do this properly – and regularly. So, if you walk past our office and see Michael and Dallas having a chat over a coffee, don’t ask questions. We aren’t bludging. We’re think tanking!
 
And we love it.
 
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Published by Dallas Davison, Michael Hogue and Ali Hogue. March 10, 2022