Financial planning is really about… tax-deductible advice

As every Dover adviser already knows, here at Dover we focus on financial strategies rather than financial products. This is because ultimately financial planning is all about strategies. The best financial product in the world is useless without a financial strategy.

Clients must have financial strategies.

A strategy-based financial planning practice is far more viable and valuable than a sales-based practice.

The client time frame should be thirty years, not thirty days. And the best thing for clients is also the best thing for advisers: it’s a beautiful coincidence of interests. Everyone wins.

Long term relationships are what it is all about, for both clients and advisers.

Strategy-based practices’ fee notes are more deductible

Another advantage of a strategy-based practice is the advice fee is likely to be tax deductible for the client.  (We have to say “likely” because, ultimately, deductibility depends on the facts of the case.) The fee notes tend to be for lesser amounts, and paid more frequently, say once a quarter, for monitoring and reviewing the strategy, rather than large up-front, once-off, fee notes. This means they tend to be more tax deductible assuming, of course, that they relate to assessable income producing investments.

If a client is paying tax at 45% a deductible fee note costs much less than a non-deductible fee note. The after-tax cost of $1,000 tax-deductible fee note is $550. That’s a 45% discount, and that’s great.

Strategy-based practices have a tax-based comparative advantage

This fee note tax deductibility gives strategy-based practices a big advantage over their competitors. The strategy-based adviser’s fee notes will be tax deductible, because they relate to on-going assessable income. But their competitors, who are still stuck on recommending managed funds and not doing anything else, cannot issue tax deductible fee notes. The strategy-based adviser’s clients win (again).

How can you take advantage of this advantage?

Obviously you (the strategy-based adviser) should be aware of the issues and, within the parameters of professional propriety, ensure your fees are as genuinely as deductible as possible in your clients’ hands.

Pointing this out to clients in the first meeting helps reduce fee resistance and helps make sure your clients get the on-going service and attention they deserve.

The Dover Group