Housing can no longer be viewed as the backbone for the wealth creation for Australians and financial advisers will soon have to develop wealth strategies to adapt to this evolution.
Insignia Financial partnered with social researcher McCrindle to develop the Financial Freedom Index to track the changing aspirations of Australians.
The core proposition of the index – which found a score of 49 out of 100 – showed more needed to be done for Australians to reach financial freedom.
Generation X (43- to 57-year-olds) and Baby Boomers (58- to 76-year-olds) want financial independence, but Generation Z (13- to 27-year-olds) want to own a home – which ultimately plays into that independence. The research found the most critical aspiration for Australians is achieving financial independence (55 per cent), regular holidays (50 per cent), maintaining work/life balance, and home ownership (both 45 per cent).
Generation Z are the only cohort prioritising home ownership as their main aspiration, with 63 per cent citing it. However, 54 per cent of Millennials (28–42-year-olds) instead named work/life balance as their main aspiration.
Overall, 60 per cent of Australians are more willing to pursue their dream life, versus 40 per cent that would prefer to own their own home.
The findings of the research are similar to that done by AMP earlier in the year which found Australians view wealth as more than simply owning a house.
McCrindle founder Mark McCrindle tells Professional Planner the data backs up the notion that Australians have been re-balancing their life since the Covid-19 pandemic.
“It’s about work life/balance, it’s about enjoying the journey not just in this case, the financial destination,” McCrindle says.
“It’s taking holidays; dream life, not just dream home; ensuring they can have a financial plan and retirement nest egg, but it’s also about having finances that can make their life work now and give them options.”
He adds the lines up to what the researcher has found in its work – that Australians have taken of a broader view of life since the pandemic.
“They want to make sure there’s flexibility at work, whether it’s achieving goals or time with family,” McCrindle says.
Insignia CEO Renato Mota says he was surprised by the prioritisation of dream life over dream home.
“For a nation that’s been obsessed with property for a long time it feels like there’s a shift, a real structural shift there,” Mota says.
“People are wanting to be more active; they’re looking for alternative wealth creation vehicles. That’s music to the ears of our industry which has dedicated decades of professional expertise in helping people make those sorts of decisions.”
Mota notes superannuation is an obvious part of the solution when it comes to retirement, but he adds holistic financial advice is likely to be the most comprehensive process for someone to understand their own goals.
“That’s the beauty of financial advice; it doesn’t define goals for people it actually helps them understand their own goals,” Mota says.
“That’s still the most comprehensive process available to people to truly understand the goals, to learn about financial literacy and deep their financial literacy knowledge and that’s clearly an issue that comes through the report.”
Changing motives
The research found women (55 per cent) are more “extremely motivated” or “very motivated” than men (44 per cent) to achieve their financial goals.
Mota says the research shows the different experience women have to money compared to men.
“Recognising our female population – half of the population – has a very different relationship with money is important to make sure we can serve them effectively,” Mota says.
According to the research, three in 10 Australians received no financial education in childhood, sparking a new wave of young people eager to improve their current financial situation and older counterparts wanting to improve their financial knowledge.
“That reinforces a known issue but one we’ll look to shed some more light on going forward,” Mota says. “There is a real need to reinforce financial literacy education in education more broadly.”
As part of the research, Insignia announced it partnered with charity The Smith Family to help provide up to 500 students with essential money management skills.
“That’s part of the reason we’re also enhancing with The Smith Family and doing some work around that to help promote and empower people through knowledge of finance,” Mota says.
Bucking trends
Generation Z differed from the other generations with 63 per cent citing owning their own home as their top inspiration.
McCrindle notes this is part of a significant generational change with the attitudes of the emerging generations differing from previous ones.
“The fact that Generation Z were the least likely to say that owning their own home is part of that Australian dream,” McCrindle says.
“They still want that home, that’s still a key focus, but that’s not the sole focus. Generation Z was also the most likely to say that an investment property is part of that Australian dream, not just owner-occupier.”
McCrindle says the data found many of the negative assumptions made about Generation Z are unfounded.
“It belies this stereotype that young people are just living off the bank of mum and dad, they’re getting by, and looking for the ideal job and not prepared to work hard,” McCrindle says.
“It’s actually the opposite. They were the most likely to want to invest in their financial literacy. They were the most likely to say they had this strong motivation to their financial freedom and they were most likely to say they’re prepared to hard things like take on multiple jobs, work longer hours and have a side hustle to achieve it.”
