As financial freedom takes over as the new measure of wealth, do advisers need to change their approach?

A recent report from AMP and demographer Bernard Salt has revealed that Australians no longer view home ownership as the sole measure of wealth, as previous generations did. Rather, many now prioritise financial independence that allows them to pursue their passions and support loved ones.

The research looked at home ownership census data from 1911 to the present, finding that the rate of ownership peaked in 1966 at 73 per cent, followed by a steady decline to the current rate of 63 per cent.

Commenting on the findings, Mr Salt said: “Our singular focus on home ownership in the middle of the 20th century delivered a sense of security to returning diggers whose childhood was spent navigating the travails of the Great Depression. 

“Getting married, having kids, buying a house, holding a steady job were values that shaped the times.”

He explained that what’s changed is that modern-day Australians have goals that go beyond just owning a home. Namely, alongside home ownership, they also prioritise factors such as their work arrangements, relationship choices, and overall lifestyle preferences, including where and how they live. 

“Many of these things have changed dramatically since the 1960s.”

According to AMP, the research delves into significant societal changes that have occurred over the past 50-plus years by utilising demographic data to analyse how attitudes have evolved, and what constitutes wealth in Australia today.

The research indicates that Australians are marrying and having children later, experiencing higher rates of divorce, and enjoying longer life expectancies, and that as a result, many Australians are spending more time alone, leading to an increasingly individualised perception of wealth.

Interestingly, the research also showed that while in 2022, both workers and retirees were burdened by financial stress due to issues like supply chain blockages and rising interest rates, focus groups conducted in early 2023 showed that the pandemic has shifted the national mood towards a more philosophical outlook on wealth, where financial independence, good health, and freedom of choice are considered more important than financial wealth.

This, according to Matt Lawler, director of AMP Advice, presents a great opportunity for advisers.

“I think the advisers will be playing more of a role in that lifestyle piece into the future … and also that moves into estate planning, that moves into intergenerational transfer and even bringing some of that inheritance forward and giving clients confidence to spend the money or to pass on the money to kids,” Mr Lawler said. 

Also contributing to the changing perception of wealth are increased female workforce participation, the introduction of the superannuation guarantee, the growing prevalence of apartment living, greater prosperity due to globalisation, and the COVID-19 pandemic which has impacted recent perceptions of wealth.

Mr Lawler added that rather than just focusing on the figures, understanding these trends could be important for advisers.

“A big part of the adviser’s role is the EQ side, which is sitting with a client to understand what the lifestyle is that they want to lead. What is important to them about money.

“It’s not just about ‘I want to have a million dollars, I want to have $2 million’, it’s what’s that going to do for you? What sort of lifestyle does that give you and does that match what you want to do? So, I think these trends are really important just to pick up on some of the things that they’re saying.”

Also commenting on the report, AMP chief executive Alexis George explained that modern-day wealth obliges people to consider what their goals are and to put financial plans in place. 

“The earlier we do this, the more likely we are to achieve those goals,” Ms George said. 

“The challenge is that despite Australia having one of the world’s highest GDPs, a resilient economy, and a strong education system, we know that financial literacy is poor, and financial advice remains out of reach for many.”

As such, Ms George emphasised the significance of enhancing financial literacy and expanding access to financial advice to help Australians attain the wealth they aspire to.