An absence of good health and an absence of good finances means an absence of choice. For most people that will mean their health and their finances will be some of the most important priorities in their lives. This puts doctors and financial advisers at the front line of diagnosing problems and offering solutions to lead healthier and wealthier lives.
It can also put them on the frontline for addressing misinformation. Misinformation is not new, quack cures and financial scams have been with us for a long time and disseminated since the early days of the printing press. The internet and social media have added a new dimension by sheer volume and targeting. Show an interest in a topic and a site’s algorithm will begin showing you more of it.
A recent qualitative interview study was done with healthcare practitioners in the UK. It looked into how doctors and nurses were dealing with misinformation post pandemic. It found misinformation affects patients’ decisions to follow a treatment or guidance prescribed to them. There might be a general feeling the pandemic has led to an increase in misinformation, but those interviewed suggested misinformation isn’t a new phenomenon in healthcare, and they’ve long dealt with it.
The reasons someone might follow misinformation were greater access, via something such as google, their own personal beliefs or cultural reasons, or getting advice from a different authority figure in their life they trusted – in some cases this was a political influence!
There were also certain reasons they’d be less likely to trust their healthcare practitioner. They were more trusting of information on social media, not satisfied with the healthcare practitioner’s experience, or doubted whether the information they were being told by the healthcare practitioner was up-to-date.
There are some implications for a patient’s health here if they don’t follow a plan, just as there are implications for someone’s financial health if they don’t follow their financial plan. There is a slight difference with financial advice. While the average person may be able to google diagnose themselves, they can’t prescribe themselves medicine or ask a family member to perform surgery! Investors who take ad hoc advice or go around their adviser to do things themselves can be an unwitting danger to their finances.
An example of this appeared in a recent column by well known financial columnist Noel Whittaker. Husband 66 and wife 55, husband had $800k in superannuation and decided to retire. They took advice the husband should move his superannuation into his wife’s name. This would ensure the assets were not subject to means testing, and the husband would be eligible for the full age pension until the wife was 67. Great.
Unfortunately, they later read somewhere about a “secret super tax”. In reality, it was no “secret tax”, merely the normal tax on superannuation accounts in accumulation mode, 15% on earnings and 10% on capital gains over 12 months. They switched her superannuation account to pension mode in the attempt to save a few thousand dollars a year in tax, making it assessable for the husband’s aged pension again!
We’ve been told of similar stories, usually clients’ friends or relatives who didn’t need advice and were happy to play it by ear. In one instance, after changing their fund from accumulation to pension mode to save some tax, they continued to claim the full age pension when they weren’t eligible. When Centrelink caught up with them, they were asked to pay everything back!
It’s one thing if you’ve been misinformed by word of mouth or social media, but there are some channels you should expect nothing but the truth from.
Last month, a client sent a colleague a confusing flyer. It suggested the reader could be eligible for a “retirement reward” from their super fund. We were confused. What was a “retirement reward”? When we read the flyer, it became clear the “retirement reward” was just switching the superannuation account from accumulation mode to pension mode, where the fund no longer paid tax, thereby allowing a refund of the money set aside for future tax liabilities.
What made this flyer strange was the fact it was a marketing flyer distributed by an industry super fund. Essentially, they’d concocted a marketing term “retirement reward” for what really should be the investor’s money.
While this might be an anomaly in an industry super fund, which might be their “reward” angle, if someone were running an individually taxed super account, they wouldn’t have had the tax taken ahead of time – meaning it wouldn’t need to be credited back and nor would it need to be framed as a reward!
No wonder it’s confusing for investors.
Financial advice can be regarded as an intangible because you rarely get to see the sliding door or “what if?” scenario. Only when you see or hear of someone else blowing themselves up, do you realise how valuable it is.
In the absence of knowing, always ask. Advisers get asked a lot of the same questions, so they’re well versed in answering them.
The most common questions will be market or investment related: the direction, how the economy or politics might affect things, or questions about a talking head who has predicted the next crash. In the same vein, there will be random questions about great investment “opportunities” that are usually opportunities to lose money or be fleeced.
The secondary ones will be whether they can afford something. In the case of retirees, without an income they are relying on the cashflow from their portfolio, or it being combined with some aged pension. This is why cashflow modelling is done. Gifting to junior will have different implications depending on portfolio size. At several million, handing over $100k when you’re drawing $60k a year likely isn’t an issue, at $800k when you’re drawing $60k there are real implications for portfolio sustainability and future Centrelink access.
The third wave of questions will be more technical things that may relate to superannuation or Centrelink or legislative changes. These will be in the weeds, so most people are generally wary, and accept they don’t know what they don’t know, because for the uninitiated those weeds can be growing on top of a swamp. One wrong step and you’re in the water. Someone acting on misinformation here can cause themselves immediate financial damage.
No matter what it is, always ask. Advisers enjoy answering prevention questions more than they enjoy performing emergency surgery!
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
With thanks to FYG Planners for this article