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Higher-for-longer rates dominate adviser conversations

"Higher-for-longer interest rates" are dictating many adviser-client conversations, according to BT, as they gear up to close the financial year.

An analysis of 8000 queries from financial advisers fielded by the BT technical services team found that inflation and cost-of-living pressures dominate many conversations.

How clients can find ways to boost their income has been the most frequently asked question in the last few months.

BT head of financial literacy and advocacy Bryan Ashenden said with Australians living longer than previous generations, it's important to consider clients' income needs and plan to enjoy an active life for longer.

"Clients may be missing out on better returns that equities and other asset classes can produce over longer investment periods. The new financial year is a good time to review investment strategies. Investors might want to weigh up whether riskier but higher return investments are appropriate for those who are investing for the medium to long term," he said.

According to National Seniors Australia, about 80% of older people are feeling the impact of higher living costs, with healthcare costs, energy prices, and groceries being their top concerns.

When considering how to boost income and find savings, Ashenden said it's important to assess whether retirees are entitled to any government support, such as the Age Pension or concession cards that give access to more affordable healthcare and medicines.

Government initiatives such as the Commonwealth Rent Assistance increasing by 10% from 20 September 2024 can help alleviate financial pressures.

This social security measure benefits more people than what some clients might expect, for example, those who are living in retirement villages may qualify for rent assistance, Ashenden said.

For the mass affluent segment, advisers are busy helping manage budgets, superannuation, and tax strategies.

The proposed Division 296 tax on superannuation balances is also key focus.

If the legislation passes, it will reduce the superannuation tax concessions for those with total superannuation balances that exceed $3 million, Ashenden said.

"Under the proposal, from 1 July 2025, clients will pay an additional 15% in tax on earnings corresponding to the portion of their superannuation balance above $3 million," he said.

"While the tax is not yet law, many advisers have been on the front foot and have already discussed this proposed change with clients. For those who haven't, there is still ample time to do so. There is no one-size-fits all formula for calculating the additional tax payable, as there are certain circumstances that need to be taken into account."

Read more: BTBryan AshendenAge PensionCommonwealth Rent Assistance