Lack of literacy promotes unrealistic goals

Australians’ lack of financial literacy is contributing to unrealistic expectations about their retirement, with more than half of consumers saying they want to travel regularly in their retirement despite the fact 63 per cent say they do not have a financial plan to guide their savings.

Sunsuper’s “2017 Australian Employee Insights Report”, based on a survey of over 1000 Australians, found that although 51 per cent of consumers had nominated travel as a key retirement goal, more than 40 per cent had not thought about how they were going to use their superannuation to fund their retirement.

At the same time, the report revealed 73 per cent of Australians thought they would have to rely on the age pension when they gave up work.

Speaking to financialobserver, Sunsuper head of advice and retail distribution Anne Fuchs said a lack of financial literacy was most likely to blame for the apparent gap between what many consumers wanted to achieve in retirement versus what their actual financial situation would be.

“Because financial literacy is quite low, Australians as a consequence have quite misguided expectations about what we think we can achieve,” Fuchs said.

“In Australia we are often brought up not to speak about money and because we are not speaking about it, we don’t understand our full financial position so we are prone to having unrealistic expectations.”

At the same time, she said many Australians were reluctant to seek financial advice as they were embarrassed or afraid of having third-party confirmation that their financial situation was not ideal.

“People have dreams about what they want to do in retirement and they are scared to speak to someone because they don’t want to be told it’s not possible – living in denial can be a happy place,” she pointed out.

To that end, Sunsuper had developed a “nudge” strategy to engage small groups of fund members around the importance of specific aspects of their finance to ensure even those who avoided seeking full financial advice were being encouraged to take action to improve their situation.

“We have good data around where [a member] is at a point in time and where they should be, and we take insights from that and get small groups of people around a boardroom table to have a conversation,” she said.

“If we take that approach, we find we have greater success as opposed to a generic presentation about the value of advice – we develop trust with the members so they don’t view us with a lens of suspicion and they are quite open to it.”

By Sarah Kendell
22 Aug 2017
financialobserver.com.au