Roskow Blog

The end of the financial year is less than 12 weeks away which is hunting season for unethical, greedy financial advisers and accountants.

Over the next few weeks the focus of the finance section of newspapers will turn to tax.  Headlines such as “10 strategies to reduce your tax” will be at the top of every editor’s wish list.  By and large these articles are informative, useful and stay within the boundaries of the law.

The real threat at this time of year is advisers that provide conflicted advice, but ironically the cause of the problem could be you.  If you seek advice from a financial adviser or accountant with the prime objective of “Help me reduce my tax” you’re asking for trouble.

“Tax effective” investment schemes that involve tree plantations, wineries, almonds, olives even ostrich eggs become all the rage at this time of year because they provide a wonderful short-term solution for both you and the adviser.  Longer term, they stink for both you and the adviser.

In the short term these schemes deliver an immediate tax refund of up to $50,000 to you and a 5-10% commission to the adviser.  Everyone wins.

Longer term, the loan that gets you the refund becomes a stain on your investment portfolio because the scheme doesn’t deliver the profits it projected in the product disclosure statement.  And the reputation of the adviser/accountant takes a hammering because what appeared a great opportunity was in fact a bad financial decision.

These schemes are legal and in theory can work but in practice the problem with them is they are controlled by men in suits who receive high management fees, not farmers.

Clients rarely have a positive investment experience which is why you’ve never heard your friends or family rave about them.  Most people don’t talk about it because they feel so embarrassed or ashamed at being sucked in.

Some clients attempt to take action against their adviser, but if you asked that fateful question of can you “Help me reduce my tax”, it’s likely you haven’t got a leg to stand on.  What you should have asked is “Help me create wealth” because this is something you can keep your adviser accountable to.

Forward a link to this article to any friends or family who are looking for a short term fix to reduce tax to warn them of the trap they can fall into at this time of year.  There are a lot of strategies we implement for clients to reduce their tax, but they’re long term solutions and implemented as part of a game plan.

Next newsletter I’ll reveal the five words that can ensure you always have a positive investment experience.