Research conducted by ASIC in their report 'Financial advice: What consumers really think' reveals that 49% of survey participants believed Financial Advice was only for the wealthy.
This insight is interesting because
This is somewhat of a chicken and the egg situation - advice can make you wealthier, however if you don't feel wealthy enough to receive advice in the first place, you may not make progress to ever getting wealthier and
'wealth' is a subjective metric and everyone has a differing view of what it means to be wealthy
So, let's first define Wealth. The average household net worth in Australia is $1.4 million dollars. This figure includes the equity within your home (the value less your mortgage), plus your superannauation, savings and other assets. However your wealth is not only your asset position, but also your income levels and ability to save a regular monthly surplus. The median individual income in Australia is $55,000 per annum.
Whilst arbritrary numbers often have exceptions, it is my view that most people can benefit from comprehensive advice when they have at least:
A combined household income of over $200,000 per annum or
Combined household investable assets (including superannuation but excluding the equity in your house) of over $250,000
You may be wondering why advisers often have income and asset value thresholds? There are two reasons:
Firstly, when people aren't earning above certain thresholds, their capacity to save is limited as their proportion of fixed expenses (such as mortgage repayments, utilities, groceries etc) is a higher proportion of their total expenses. Therefore, in these situations there is not much an adviser can realistically help with. In contrast, advisers are better placed to help people who make higher incomes, however spend a much higher portion on discretionary expenses, instead of saving and investing.
Secondly, it is typically easier to provide greater levels of fee savings, tax savings and investment outperformance on higher starting wealth balances. This is important as advisers are required to put clients in a better position, relative to their fees.
So to answer the original question, is Financial Advice only for the wealthy? The answer really is no. It is true that many clients who benefit from advice do have above average incomes, however relative to average household wealth, most clients can benefit from advice. A primary explanation for this rationale is that given most people have considerable investable assets through their superannuation, financial planners can play a key role in helping to maximise people's superannuation through varying advice strategies.
At Source Wealth, we offer obligation free initial appointments to explain whether financial advice would benefit you which can be booked here.
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