Financial Resilience
Discover what Financial Resilience is and how financial advice firms can improve Financial Resilience in their client base.
What is Financial Resilience - a definition
Financial Resilience is a measure of an individual’s financial preparedness and ability to navigate threats to financial security and unexpected events. It is about how Advisable Australians plan, and their ability to meet financial responsibilities.
It considers the financial habits and preferences of the Advisable Australian such as, their household wealth, their insurance coverage, and whether they like to plan for the future.
Financial Resilience is influenced by the following factors:
1. Wealth indicators
Levels of income, assets, debt and saving habits.
Higher Financial Resilience is linked to higher household wealth - including household super, household investable assets and home
2. Insurance uptake
A person’s insurance coverage and preferences.
How confident are you that you have sufficient and appropriate insurance cover for your needs?
3. Investment planning and engagement
Current and future investment plans.
Agree - I am highly or reasonably engaged with my investments and investing activities
The Advisable Australian - A new way to think about investors
To learn what financial advice firms can do to tailor their service offering, based on where their clients sit on the Financial Resilience framework, download our special report, The Advisable Australian Volume 1 - A new way to think about Australian investors.
How personal Financial Resilience affects Australians
Typically, those with low Financial Resilience are less prepared for the future, as they have lower levels of income, have poorer debt management and undertake no proactive financial actions. As a result, it can lead to financial concerns and inadequacies. More than three in 10 (33.8%) of the low Financial Resilience group say they are not, or minimally confident, in the appropriateness of their insurance cover (compared to 12.3% of the very high). And a little over three in 10 (30.5%) say they are not confident in achieving their financial goals (compared to 10.0% of the very high group). This group are are more likely to need financial advice.
We find that those in higher Financial Resilience groups have higher levels of income, are more future focused, likely to plan things in advance, go for the best possible outcome, even if it’s not certain, are extremely confident in their insurance cover and undertake more proactive financial actions, which may include having a financial adviser (47.6% of those in the very high Financial Resilience group receive financial advice).
Those with Low Financial Resilience are less prepared for the future
I feel confident that I can achieve my financial goals...
Understanding the Financial Resilience groups in Australia
Advisable Australians fall into four naturally occurring Financial Resilience groups. The slight majority lie within the low and medium groups, but there are a large number of people in the high and very high groups.
Financial Resilience groups by size
|
Group |
Percent |
Number of people* |
|
Very high |
21.6% |
1.86m |
|
High |
22.9% |
1.97m |
|
Medium |
28.1% |
2.42m |
|
Low |
27.3% |
2.35m |
* Figures derived from ABS statistics based on survey responses
The age of the individual and their life-stage will considerably impact personal Financial Resilience
Wealth is generally accumulated over time, and income and insurance will change with age and life-stage needs. For example, retirees often have less income and a lower need for risk insurance coverage.
As for investment planning, often the older you are the more likely you are to have set out plans earlier that you are now living. So, planning becomes less important. Conversely, there are those under 40 years who do look to the future and plan things in advance.
This explains the fact that by the time individuals reach their 60s, the majority sit within the medium and high Financial Resilience groups, rather than the very high and low Financial Resilience groups. They have lower income, have paid off their debt, are less likely to need insurance and, as such, probably plan less.
Financial Resilience is polarising for the younger Advisable Australian, where those under 40 years old are just as likely to have either very high or low Financial Resilience (33.8% and 40.0% respectively).
Financial Resilience groups by age
|
Age group (years) |
| Group |
30-44 |
45-64 |
65+ |
|
Very high |
33.8% |
18.8% |
7.7% |
|
High |
12.3% |
27.1% |
31.9% |
|
Medium |
13.8% |
30.2% |
46.5% |
|
Low |
40.0% |
23.9% |
13.9% |
How advisers can shift individuals from low to very high Financial Resilience
In helping build Financial Resilience, The Advisable Australian needs assistance in planning, investing, general financial education and goal-setting guidance. Clients with lower Financial Resilience require more guidance and support whereas those with higher Financial Resilience are seeking to validate their decisions and be inspired.
To learn what financial advice firms can do to improve Financial Resilience in their client base with our Financial Resilience framework, download our special report, The Advisable Australian Volume 1 - A new way to think about Australian investors.
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Discover the Emerging Affluent, the next generation critical future market, and how to target them. Download our special report, The Advisable Australian Volume 2 – The fight for the future market: The Emerging Affluent.