Patrick Canion ipac Western Australia chief executive has said that the recent decision to cut the cash rate by 25 basis points will impact the work of advisers.
Canion has commented that advisers will need to re-assess their clients’ portfolio structure, debt and income needs. He has also speculated that the cut will mean that planners will be inundated with more intensive work with their clients to “restructure portfolios to ensure the right amount of income is still being generated by the capital, or helping clients restructure debt to take advantage of it, or reviewing their Centrelink entitlements.”
Assistant Treasurer David Bradbury’s assertion that “all families and small businesses will welcome the cash rate reduction” was also questioned by Canion as he commented that “for people in debt (ie mortgage) reduction of interest is a good thing because if they keep repayments the same then obviously they will pay off debt quicker. But for self-funded retirees, or pensioners, who rely on interest income to provide their income, it obviously means their income reduces.”
Other commentators have stated that the cut will also impact SMSF and retirees, indicating more work for advisers by them having to work with the two groups in order to seek other sources of income. Retirees and SMSFs depending on cash accounts and the interests of bank deposits and market-related investments will have to reach their advisers for help to compensate the fall. Phil Anderson, Association of Financial Advisers chief operating officer has said that, “advisers will have to seek other sources of income for this type of clients” and “the measure will also have an impact on Centrelink and other aspects across this spectrum, so the rate cut is another reason for clients to talk to their financial advisers.”