Australians are pretty switched on when it comes to finances – we’re certainly not a nation with our heads in the sand. According to RaboDirect’s annual 2014 Financial Health Barometer, people from all age groups believe they are informed about money matters.
But fewer than half actually have long-term financial plans, which means the comfortable retirement they dream of may never come to fruition. Given the rise of pessimism over the nation’s economic health, it would be wise to start thinking long term.
What’s falling in popularity?
When it comes to financial advice, most people still talk with their bank as their first port of call. But we don’t seem to rely on our banks as much as we used to. In 2012, 42 per cent of Australians used their bank as their top source of financial information and advice. This plummeted to 26 per cent in 2013 and now stands at only 21 per cent.
Even if our friends and family aren’t professional financial advisors, we still tend to turn to them for advice. Friends, family and colleagues are the second place that people go to, but there’s been a big drop in consulting relatives as well.
Nearly one in three Australians sought banking advice at breakfast tables and barbecues in 2012, dwindling to just 16 per cent in 2014. Even among younger people, who traditionally love getting money advice from friends and family, this source is waning. One in three asked mum and dad for advice last year, but only one in four chose to this year.
We’re even turning our backs on the money professionals. The amount of people using tax accountants and agents has fallen by over half since 2012 (28 per cent to just 13 per cent), and while older Australians still like to consult tax experts and financial advisors, they’re also using them less.
New sources of advice
So if we’re shunning banks, mates and sometimes money professionals, where are we going to get advice instead? With everyone pulling out their smartphones and checking Facebook at their whim, it’s not surprising that social networks are turning into the new money gurus.
The use of Facebook for financial advice doubled from 2013 to 2014, while “other social media” tripled in popularity. Gen Y, living and breathing the digital world as they do, were particularly strong users.
There’s also a bit of a gender split when it comes to seeking money advice. Men are getting much more open to using social media as well as advertising, phone consultants and industry experts. But everyone’s loving the government’s MoneySmart website, which continues to climb the ranks of trusted sources.
Newspaper, magazine and television advertising saw a boost, nearly returning to 2012 levels, though all are still fairly minor sources. Telephone consultants and industry experts were also accessed more in 2014.
Women are less likely to get financial advice than men from any source, except for banks and friends and family. Women’s use of financial advisors also halved from 2012 to 2014, while men’s remained nearly the same. This is worrying, because extensive research shows that women still earn less than men, and worse, have only half as much superannuation
Trusting financial advisors
On the whole, older Australians are a cynical bunch. Fewer than one in five “strongly trust” financial planners, and they’re less than half as likely than other age groups to put much stock in what friends and family say. Hardly any boomers rate Facebook, online blogs and forums highly (1 per cent) compared to Gen X and Gen Y (around 10 per cent).
By contrast, younger Australians are much more trusting. More than a quarter rate banks, financial planners and accountants as 8-10 out of 10 for trust. Men tend to be a little more trusting than women for most sources, particularly with internet-based sources.
Overall, 41 per cent of Australians trust the advice from financial advisors and planners, but cost appears to be the main deterrent to seeking it, with 58 per cent fearing it will be expensive. Almost 40 per cent find financial advice “daunting” and 36 per cent believe they have enough personal ability and understanding to plan for retirement.
Carefree younger Australians also aren’t worrying about the long term. Why stress about retirement when it’s decades away? Almost half of Gen Y respondents believe retirement is too far away to think about compared to just 4 per cent of boomers.
Baby boomers are in a sorrier state. They’re less likely than younger Australians to be relying on an inheritance to support their retirement or expecting employer-funded super to do so. Given their cynicism, their increased reluctance to seek advice and their growing economic pessimism, the future is looking bleak for many. But it doesn’t have to be. Older Australians should consider getting their financial planning in order.