We spoke to financial advice industry specialist Nerida Cole from Dixon Advisory about the impacts of COVID-19 on the financial wellbeing of Australians, as well as how the crisis has demonstrated the true value of advice.
What do you think the role of financial advice will be in Australia's economic recovery?
I think it’s going to be critical because we know that coronavirus has actually been both a health and an economic shock. And that’s creating a situation where, for some people, unfortunately they really will need to rethink their career, rethink their financial plans and financial arrangements and having a trusted adviser that can actually help work them through those complex decisions will be very important.
The other side of the coin is that we are also seeing that even if perhaps people aren’t forced into making a decision about changing work or financial arrangements, that they are perhaps interested in making some new life changes.
They’ve realised from having to work from home and the change of their employment arrangements that they would like to have a different lifestyle, and then wanting to investigate what they would need to do in terms of their financial arrangements to make this possible.
We’re not necessarily talking about making things a possibility tomorrow for most people, but exploring how they could work towards that over the next few years so that they might be able to retire a little bit earlier, or maybe they could actually reduce the number of days that they’re working per week.
How has coronavirus impacted the market and advice community – and what has this crisis revealed about the financial wellbeing of Australians?
What is surprising is that people from every group – every employment group, every sector, every societal group, has been impacted by this crisis.
We’ve been helping retirees who have been dealing with much lower levels of income coming through their investments, and high levels of uncertainty and volatility. And especially for them, once they hit that stage where they’re no longer working – they don’t have the option to save some more money to top-up that nest egg.
And that’s been one of the areas that we’ve been busiest in is really just trying to work with retirees to give them information, but to also help them filter through that information so they know what they need to know. And trying to make them feel more comfortable in making decisions that they might really need to make. Whether it’s reducing their level of drawdowns from their superannuation pension, or whether they might actually stop the drawdowns all together and draw on some other cash they have. Sometimes it’s even helping them think about how they are going to negotiate as a landlord around their rental properties as well to make sure that as much as possible, they’ve got a long-term sustainable income flow coming through.
But we’ve also been dealing with younger people who have found themselves with a job loss wanting to know whether they should be accessing their super, or what other options should they be drawing on to keep themselves afloat. As well as young people worrying if with the tougher outlook for employment they need to put their plans for buying their first home on hold.
In the middle, we have seen families who have want help to look at how they manage their ongoing cashflow since their income has dropped and they’re wanting to know what they prioritise with their remaining income. Whether it is the mortgage, the insurance payments, how do they keep things going so that their family is protected. And also what can they do to reinforce their financial position into the immediate future should the recovery be very slow.
This really has been a crisis where many people are feeling the brunt – even people in a very good financial position have been impacted.
As an advice business leader, what is the true value of advice in your opinion? What do you see the future of advice to be?
It is so important that when Australians need assistance and need help with their financial arrangements that they can obtain that help at an affordable level. I think that is also what’s been highlighted throughout this crisis is that when people need to get financial advice, they need to be able to find a reliable, qualified professional that can help them – but that advice needs to be able to be provided in a cost effective way as well.
So that’s obviously something that the industry does need to keep working on – trying to manage that challenge of providing high quality processes around advice while managing the cost of advice as well.
What is one message about financial advice that you want Australians to know?
One thing that we know from multiple surveys is that people that do have a relationship with a financial adviser actually highly value that relationship and they do feel that they get very valuable assistance. Yet, we know at a whole of community level that perhaps people that haven’t engaged with a financial adviser might not have that same regard and they question its value for money.
One good thing that might come out of this crisis is that those people that never had that engagement with a financial adviser before now are likely to have a growing regard and appreciation that financial advice can actually be very valuable. Hopefully with the help of these new relationships, we can try and build up some further regard for the industry ongoing.
To stay updated on the Future of Advice Report, see more here.