Getting into the minds of our clients

Financial advisers are in a privileged position to help clients through key life stages and understanding their needs is key to the value of advice, Bryan Ashenden writes.

The benefits of quality financial advice are clear to those of us who worked in the industry but we have a way to go in helping Australians realise the full benefits of advice. That’s why it’s important to understand how they are thinking, and focus on what’s important to them.

BT recently asked Australians from all walks of life how they feel about their personal financial situation.

Around half (52 per cent) rate their situation as being positive, 48 per cent disagree.

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While this seems average, we know that finances can have broader effects beyond pure money matters. 

One-in-three people say that their financial situation affects their quality of life, including their mental health, family relationships, physical health or productivity at work. 

Concerns about stagnant income, debt repayment, and retirement adequacy woes are fuelling this sentiment.

Income stagnation

Overall 70 per cent of people are concerned about income stagnation. 

While perceptions around income stagnation are on the rise, there are certain pockets where this increase is more noticeable.

By employment status, retirees are among the most concerned, with 80 per cent saying that their income has stagnated. 

Given the subdued interest rates and the flat market growth, a noticeable concern that retirees may harbour is around how market performance is affecting their lifelong retirement savings. 

But things get interesting when you look by age group. Concerns amongst middled-aged Australians have outstripped all age cohorts on a growth basis, with 45 to 54-year-olds having had the biggest jump in concerns (11 per cent), up from four years ago. 

When you consider the fact that this cohort is in its prime money making years, most likely have grown children who they may be partially supporting (and likely still living at home), and the fact that their own retirement is on the horizon, it’s easy to see why this cohort may have growing concerns around income.

Debt repayment

Overall, 30 per cent of Australians have concerns about repaying their debt including credit cards, car payments and other loans.

The noticeable pockets of Australians feeling the pinch around debt repayments include 25-to-44-year-olds and mortgagees.1

Of these, the group that is increasingly worried about debt repayment are under 35s (18 to 34 year olds). And 38 per cent of this group are concerned about debt repayment, up from 27 per cent four years earlier.

When you think about the fact that this group may be saddled with student debt and are in a very active phase of their lives which often includes travel and big ticket items like first homes and weddings, this may explain the rising debt repayment concerns of this cohort.

Retirement adequacy

Retirement adequacy is a real concern regardless of personal situation, with around 44 per cent of Australians with retirement adequacy woes.

Given the fact that Australians are living longer and getting older, clearly retirement funding is top of mind for everyone.

Thankfully we are fortunate to live in a country where we have one of the best retirement savings systems in the world, so are likely much better off than other countries.

However, given the relative immaturity of the system (the Superannuation Guarantee is only 25 years young) not everyone is fortunate enough to enjoy a full working life of super.

So there is clearly not only an opportunity, but a need to support clients with retirement planning. 

While these insights give a glimpse into the current mindfulness of Australians, the advantage is that they can be used to inform adviser-client conversations in practical ways. 

It’s perhaps no surprise that those who actively set goals and make financial plans report higher levels of financial wellbeing.

In fact, there is a noticeable trend of improved financial wellbeing in line with greater frequency around goal setting and planning. Those who always make plans are around three times as likely to rate their financial situation as positive when compared to those who never make plans.  

Around 74 per cent of Australians who ‘always’ make plans on how to reach their financial goals report their financial situation as being positive compared to 26 per cent of those who ‘never’ make such plans.

When you consider the specific needs of each group, it’s an important reminder that we are in a privileged position to help clients through key life stage moments, and that’s the clear value of advice.

Bryan Ashenden is head of financial literacy and advocacy at BT Financial Group.