You may have heard that statistic that tells us that only the most financially savvy of us access financial planning services. That figure is purportedly around 20%.
That means, there’s a remaining 80% of Australians who don’t access a financial planner in their lifetime for a whole host of reasons. My company’s national survey of 1,000 people showed 22% have used a financial adviser and that many of those were already 55 years of age and over (40%), on the cusp of retirement.
The key reasons the remaining people gave as to their avoidance of financial advice was the belief they don’t need it (63%), cost (34%), reputational worries (15%), perception that advisers are only for the wealthy (14%) and embarrassment in the state of their finances (12%).
Let’s look at those responses again in a moment.
Here’s why I think financial planning it should be service all people access the same way we do doctors, dentists, teachers… The implications of not sorting one's personal wealth are dire. Take a moment to absorb this visual created from Australian Bureau of Statistics data.
Imagine 100 Australians standing in a room. All of whom are currently 25 years old. Now let’s take those same 100 people and wind the clock forward forty years to discover how well off will they be at retirement age (65).
- 54 of the 100 will rely on the government, either on pension or another form of welfare.
- 24 of the 100 will have died.
- 12 of the 100 will rely on charity.
- 5 of the 100 will still be working.
- 4 of the 100 will be financially ‘independent’.
- And 1 of the 100 will be considered ‘wealthy’.
The most stark statistic here is the 24 dead, but following that, you’re looking at all bar five people being financial independent.
The irony is that if you asked 100 people in their mid-twenties to visual their retirement days, they’ll undoubtedly optimistically paint you a whimsical far-off-picture of yachts and golf, or a big home and travelling, hobbies, not working and tonnes of relaxing.
So let's recapitulate those key reasons people gave for not getting financial advice was, firstly, the belief they don’t need it. This ABS data suggests that all bar 5 in 100 of us do. And likely those five have a planner anyway.
The second most prominent reason was cost. Certainly, traditionally, financial planning is a ‘luxury’ expense. But organisations like Yellow Brick Road have been founded to rectify this, making financial advice accessible and affordable, as well as effective and transparent. Cost today should not be allowed to act as a deterrent for financial independence tomorrow.
The third reason was reputational worries. Investigations into the planning sector may have deterred customers in the short term but will improve the ethics and accountability of the sector in the long term. And that’s better for everyone.
The fourth reason was the perception that advisers are only for the wealthy. We think you don’t need to be in the ‘accumulation’ phase of your life, we think you should start getting professional financial advice when you’re in your ‘budgeting’ phase: you have an income and some sort of goal whether it be travel, property or a purchase.
And the final reason given was embarrassment in the state of their finances. This one’s a killer. Those who avoid planners are the ones that most need it: the 69 people in 100 that the ABS tells us will be highly uncomfortable in retirement.
Here’s the scenario in Australia right now: household saving has hit a seven year low, wages growth is the weakest on record since 1971 and the average retirement payout is only $112,600 for women and $198,000 for men.
Being determined around achieving financial independence is one of the biggest gifts you can give yourself.