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BUDGET 2016 – MARK FORDREE RESPONDS

Following last night’s release of the 2016 Australian budget, Ignition Wealth CEO Mark Fordree responds and looks at how the government’s moves will affect super, SMSFs, small business, innovation and financial regulation.

Author: Mark Fordree, CEO, Ignition Wealth.

Treasurer Scott Morrison’s moves to enact measures to allow everyday Australians to boost their superfunds can only be welcome. Specifically, allowing those who have been out of the workplace due to childcare or illness to make top up payments on their return to work will go someway to addressing the fact that women in Australia typically retire with much smaller funds than men.

I believe that despite the headline contribution cap being reduced for those under 50, the catch up provisions are a great opportunity for everyday investors to maximise the potential of their investments and superfunds. It is essential for long term wealth planning that individuals not only increase their fund by raising their level of contribution but that they minimise costs from fees and maximise growth.

“While it is a positive move that the government is supporting Australians to save and grow their super it’s important that individuals take action to maximise the potential of this opportunity. Ignition Wealth empowers personal financial responsibility by providing tools and education and access to low cost diversified investment portfolios to enable everyday investors to powerfully take control of their financial futures.”

Following the launch of the Ignition Wealth Teams technology, Ignition Wealth is now partnering with financial institutions, advice and accountancy practices to provide digital financial advice services. Rising costs of compliance and administration had previously meant that on boarding a new investor with investable funds of less than $250,000 was uneconomically viable.

We are seeing an eagerness from our partners to have the capability to service the 80 percent of unadvised Australians to help them grow their wealth. Across the financial industry, professionals are looking for ways to support investors all the way along their wealth journey, rather than leaving them without assistance until they amass the required fund of $250,000.

The Ignition Wealth technology provides investors with the education and advice necessary to grow their wealth. The low cost ensures that the service is readily accessible to all Australians regardless of their means or income. For example, Ignition Wealth’s own consumer brand Ignition Direct provides digital financial advice, education, tools and calculators for as little as $16.50 per month.

“Under the old regime, many, in fact most, Australians were in their fifties before they had sufficient savings to be eligible for financial advice. By that point they had been working for 30 to 35 years and for all of that time their investment activity had been unadvised. We are working with our partners at financial institutions to make that pattern becomes a relic of the past and ensure that good quality advice is available in a cost effective manner throughout the financial life of an investor. Investing with advice earlier will have compound wealth effects.”

Last night’s budget saw company tax for small firms cut by one percent while the eligibility threshold was raised to $10million of revenue, potentially a boost for the self managed super fund industry. Working closely with the SMSF market and the accountancy practices that administer SMSFs, Ignition Wealth sees small business owners who risk retiring with relatively small funds after a lifetime of hard work and revenue reinvested into keeping their businesses afloat. Freeing up tax dollars for small businesses allows SMSF trustees to consider their personal need for a diversified portfolio, rather than unwisely holding all of their capital in the high risk option of one small business.

We welcome tax breaks for small businesses firstly because it provides breathing space for the small business owners who make up so many of Ignition Wealth’s SMSF trustee customers. Secondly, this is a great move for the fintech industry where the vast majority of businesses fall into this category and are reliant on funding to grow. Government support for innovation, both in amending the venture capital investment rules to double the fund size to $2million and in allocating some spend to promoting Australia internationally as a fintech destination are both also welcome.

“The Turnbull government self proclaimed as the innovation government. I’m glad to see this become reality with the treasurer putting the national purse behind the the innovation rhetoric.”

At a time of rapid evolution and increasing scrutiny for the Australian wealth industry the 2016 budget allocated a serious $127million to ASIC. Ignition Wealth is always consumer first. We support regulation as a tightly regulated industry protects the consumer and ensures that businesses operating in the financial space are closely monitored. Ignition Wealth is entirely independent and unbiased. The consumer has the right to expect nothing less.

Set against the backdrop of a turbulent stock market and an historic interest rate low the 2016 budget comes at an interesting time in Australia’s economic history. The interest rate reduction has particularly harsh implications for a retirees and those in pre-retirement planning.

“Yesterday’s interest rate drop to an historic low underlines the fundamental issues facing the Australian economy: the mining capex cliff, the housing market peak and the car industry closures. This combined with the biggest global bond market bubble ever seen has made it more important than ever for investors to hold their wealth in portfolios globally diversified and matched to their risk tolerance. The ultra low rates mean that self-funded retirees are having their incomes smashed and are now forced to move up the risk curve in an attempt to generate a liveable return.”