Recently I worked with Jim Stackpool and a number of other planners who share the same beliefs as we do, from the Certainty Advice Group, on a white paper titled Our Secret Financial Insecurities. One of the things we focused on was ‘facing our financial fears’. Here is a look at some of the things we discussed.
Right across Australia, we’re in a gathering storm, the effects of this oncoming storm are being felt. From small business entrepreneurs to wealthy professionals, from young couples starting a family to retirees, everyone is feeling the wind on their face.
While some are facing their financial fears with bravado, others are keeping them hidden. On one end of the spectrum, younger people are wondering if they’ll ever get into the property market, while on other end, retirees wonder if they’ve left things like super and downsizing a bit late.
The uncertainty is making everyone nervous.
According to Travis Martin of TWD Monument in West Perth, time is the pressing issue.
“Towards the end of a career, whether in business or as an employee, people start thinking forward to their children: how they will buy their first home, set up a family, or how to help them pay for a wedding.They’re worried now, and going around in circles about it.”
David Murdoch of Paxton Bridge Financial in Melbourne and I both work with business clients, that feeling of financial uncertainty is also there.
Most of our clients are aspirational and successful. So their aspirations drive them to grow and achieve, and in many cases strive for the outward trappings of success.
“Most of them are on reasonable incomes,” says Scott Farmer of Bravium in Canberra. “But they just don’t know where all the money goes. When they look at their financial position, they’re not where they think they should be and they can’t work out why they’re not.”
This creeping feeling for some, and shaking ground for others, looks to be manifesting itself in a number of curious ways.
How are Aussies dealing with financial peril?
Keeping up with the neighbours
It’s very much keeping up with the Joneses. But you don’t know whether the Joneses are hocked with debt to the eyeballs, or whether they’re actually doing really well.
All our clients work hard, and rightly believe they deserve the fruits of their efforts. This feeling is not only leading to a lack of planning for ongoing regular expenses, but also leads to a lack of planning down the track.
Terry Powell of PF Private Wealth in Melbourne says: “They have the flash home, drive a European car, and send their kids to private school. And a lot of that is funded by debt. People on good incomes for a long period of time are surprised at just how poorly off they are.”
Feeling comfortably numb
“A lot of them look as though they’re doing very well, but if you picked them up by the ankles and gave them a good shake, not much would fall out.” Terry Powell
While our politicians are being blamed for their ‘short-termism’, in many ways we may be guilty of the same charge. Terry Powell observes that with no long-term plan, people tend to focus on immediate, short-term benefits like annual holidays.
“I don’t know whether they know they’ve got financial fragility or distress,” he says. “They’re in a comfortable state of numbness, feeling neither pleasure nor pain, and so they go on, one year to the next.”
For David Murdoch, many business clients would rather say “she’ll be right” rather than look at the nitty-gritty of one day getting out of business. “They ask: Why do we need to take this three, four, five-year approach about my business exit?
I don’t know what else I would do, so why do I need to deal with this now?’”
The cult of ‘busy’
I think the default answer when you ask ‘How are you going?’ is ‘busy’. Everybody’s busy.
Across the board, stress is a huge driver of clients seeking advice. “Everyone’s so busy these days and so they have so little time for things like family, relationships, and health,” says Scott Farmer. “Finance is just another one on the list, and it probably gets pushed down the order or priorities a bit. This busy-ness ensures that other important life priorities get pushed to the side.”
How Government and Banks impact financial fear
Many Certainty Advisers have watched as public opinion of the banking industry and the legislation that supports it has slipped. Could the causes of our anxiety be this ‘new world’ of banking? Is it simply not knowing who to trust any more?
With five different Prime Ministers in five years, it’s no wonder many Australians are feeling disillusioned in the power of their government to affect long-term planning. The trickle-down effects are now being realised.
“I think there’s very poor leadership in governments,” says Terry Powell. “They’re very focused about remaining in power for their own self-interest. They are also rewarding failure and penalising success. This then flows through to people’s mentality. They say: ‘Gee why bother, let’s just live for the moment.’ I hope it’s a rough patch but I’m not seeing too much leadership that will provide some light at the end of the tunnel.”
We believe banks are still not safeguarding the interests of their clients. Some of the changes to consumer credit laws and consumer protection do help when it comes to lending but I don’t think they go far enough. They’re still not really focused on the best interest of the client.
So who is really looking after our best interests?
Across the financial planning industries, we could all do a lot more to address the broader picture of this financial peril. Like the individuals who are too busy, stressed, or apathetic to see the big picture, many advisers such as banks, lawyers, and accountants are far too focused on solving the problem immediately in front of them.
When banks only give advice on how to borrow money, accountants only give advice on tax, and financial advisers only give advice on superannuation, insurance, and some
investments, no-one has a birds-eye view.
So who’s taking control of that overall situation and putting it all together?In the main, no-one. It’s a huge gap.
If you would like more information please read our white paper Our Secret Financial Insecurities.