Their children’s financial futures and rising costs appear to be among the biggest worries financial advisers are hearing from their clients.
While some clients are seeing their retirement plans hindered due to inflationary pressures, other retirees who are better insulated from cost of living rises are still worried about the impact it is having on their next of kin.
“One concern a lot of clients are having is how to support their children in the best way,” Saikal-Skea Independent Financial Advice certified financial planner Andrew Saikal-Skea tells Professional Planner.
“There is a growing realisation that even though their children may have good incomes, home ownership is becoming increasingly difficult without parental support.”
Andrew Saikal-Skea says the firm’s clients often want to assist with contributing to their children’s house deposits or providing interest-free loans to help with interest rate pressure.
“However, they are often conflicted as they don’t want to help too much and also need to balance it against being able to meet their own financial needs,” he says.
Arch Capital director Nigel Baker agrees. “Retirees generally have a good asset base, but they worry about their children being able to afford a decent lifestyle and the ability to buy a home in the future,” he says.
Furthermore, these clients are often anxious about how far the proceeds from downsizing from the family home can help.
“A lot of wealth is locked up in housing so they are concerned about how they can utilise this wealth,” Baker says.
Cost of living pressures
Baker says anxieties have grown recently as the current cost of living crisis gets worse.
“Everyone is seeing these costs affect their lifestyles and the potential longevity of their capital,” he says.
Paul Peng Yang, a planner at PY Yang and a teacher of the Masters of Financial Planner course at Victoria University, has also found clients expressing increasing concerns about rising living expenses, particularly among the middle class.
These findings are in line with research released by Challenger last month in collaboration with YouGov. It found that the rising cost of living and affordability were growing concerns. Indeed, two in three Australians over 60 said these were affecting their confidence about whether they would have enough money for retirement.
“Clients are adjusting to the rising cost of living by spending less and adopting tighter budgets,” Yang says.
“When it comes to investment returns, their level of concern varies depending on their age and financial goals. They often prioritise managing cash flow pressures over investment returns.”
Meanwhile, Saikal-Skea says he hasn’t picked up any concerns about future returns and the impact on purchasing power.
“Most clients are aware that we have had strong returns recently and that negative times will come at some point,” he says.
“However, this has not translated into fear as such. We work on CPI-plus projections, which broadly allow for the cost-of-living increases.”
How advisers are easing anxieties
To help mitigate client anxieties, Baker says his firm relies on visual capital projection software to illustrate the impact on capital and drawdowns to try and give clients peace of mind
“We also engage the next generation as much as possible,” Baker says.
Yang says his tactics include refocusing clients goals and prioritising what matters most to them.
“By delving deeply into their spending habits and directing resources towards their key goals, we can help alleviate their concerns,” Yang says.
Saikal-Skea eases clients’ anxieties by reminding them that they are investing for long-term outcomes rather than short-term speculation.
“We ensure that we have sufficient cash and other defensive assets to weather a storm and remind clients that we are prepared for when a period of poor market performance comes,” Saikal-Skea says.
“Furthermore, we revisit financial modelling to check how we tracking, which is usually re-assuring.”
