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John Wiseman

Demand By Retired Australians Will Challenge The Financial Advice Landscape

Tagged as Retirement ChallengesOpportunities For Financial PlannersReverse MortgagesEquity Release

Demand from retired Australians will profoundly change the future of financial advice with planners challenged to provide solutions that capitalise and more effectively utilise the dormant wealth and value locked up in the family home said industry consultant John Wiseman.

Commenting further, John Wiseman said, “For many years it has been very obvious that a great number of Australians approaching or currently in retirement will have to use their family home in some form to assist them address a myriad of financial dilemmas as the result of living longer”.

“Living longer in the twilight years might sound like an exciting prospect but running out of money in retirement is going to be a very real scenario and major concern for retirees – in fact many will find themselves dealing with the ‘perfect storm’ i.e. longer lifespans; insufficient savings, investments and superannuation; low interest rates for up to two decades; and escalating cost of living/health/medical expenses”.

Added to this list of woes will be the need for general upkeep and maintenance of the family home, dealing with any unexpected major repairs and replacing the motor vehicle.

Time has most definitely not been on the side of far too many Baby Boomer Australians to enable them to accumulate sufficient superannuation with the Superannuation Guarantee starting as low as 3% in 1993.

In addition to this already daunting list of challenges, an increasing number of retired and preretirement Australians will find themselves dealing with mature age children returning home as the result of broken marriages, failed business ventures and loss of employment.

“As a result, financial planners will be on the frontline and need to prepare themselves now for a wave of enquiries and requests for assistance and solutions”, said John Wiseman.

“In preparing themselves, financial planners will need to look to the family home as source of untapped wealth to be included in the strategy/solutions they provide”.

For many, it will mean taking out a reverse mortgage or selling the family home, downsizing, renting, moving into a retirement village or building a granny flat on their children’s properties.
Equity release is another option planners will look to in increasing numbers instead of reverse mortgages as a solution said John Wiseman. 

“This alternative is currently only provided by Homesafe Equity Release and has removed the uncertain financial outcome of the traditional reverse mortgage, where compound interest can rapidly erode a retiree’s equity in their home”.

“Homesafe is not a loan but a deferred sale of an agreed proportion of the home.  The customer retains their percentage of their home, continuing to live in the property making no payments until they die or decide to sell”.

Unfortunately, Homesafe is currently only available in Sydney and Melbourne and it is hoped that they will be able to expand to other major cities as demand grows.

John Wiseman concluded, “With returns from investments forecast to be low for an extended number of years, (even the Future Fund is requesting the federal government to reduce its projections from CPI plus 5% to CPI plus 3%), the financial services sector needs to follow Homesafe’s example and respond with innovative solutions for elderly consumers that will allow them unlock the wealth in their residential property.”

“Financial planners can expect the demand for their services to grow enormously in the coming years and with the relatively low number of practitioners in the industry, many young people should be turning their attention to a career in the advice sector NOW!”