Australia: Financial advice has big impact on subjective financial well-being - AIA research

| 31 Jan 2023

Financial advice has traditionally focused on objective financial well-being. However, a new study by AIA Australia has shown that a client's subjective financial well-being is the missing piece of the well-being puzzle.

Where ‘objective’ measures describe one’s situation, ‘subjective’ measures assess how a person feels about their situation.

‘Subjective well-being’ considers the concept of how people feel or perceive their financial situations.

Data from the Household, Income and Labour Dynamics in Australia (HILDA) shows that 14% of Australian adults experienced both financial hardship and mental health symptoms at any time over the five years from 2014 to 2019.

HILDA data also shows that people experiencing financial challenges are twice as likely to be experiencing mental health challenges as those who are not experiencing financial challenges.

Similarly, people experiencing mental health challenges are twice as likely as those who are not to also be experiencing financial challenges.

This is where financial advisers can help.

By understanding how evidence-based financial behaviours can be woven into financial advice, financial advisers can develop a powerful mechanism for deeper engagement.

In doing this, they can engage with their client more holistically and facilitate more targeted and personal conversations that can resonate at every stage of life. 

In addition, by harnessing science-based design principles, the impact of population-based health promotion and prevention has the potential to change more health and well-being outcomes than before.

Financial Planner Matthew McGilvray said, “Sometimes we’ll see a client with a range of financial products across multiple institutions and although they are objectively in a solid financial position, they feel anxious because they don’t have a clear picture of their situation and whether they are getting value or losing money. They feel out of control. An adviser can pull that altogether into a clear plan that helps the client make confident decisions and have that peace of mind that they’re back in the driver’s seat.”

A financial adviser can also be invaluable when a client is having difficulty making financial decisions or is making poor financial decisions. This in turn, can facilitate financial relief and can positively impact the trajectory of the well-being cycle, potentially leading to improved health outcomes and behaviours.

“Understanding the equal importance of subjective and objective financial well-being is a game-changer. It opens up a holistic conversation about well-being, a client’s situation and what really matters to them, which puts us in a better position to create a strategy to meet their goals and really make a difference to their overall financial, physical and mental wellbeing,” said Financial Planner Tristan Knowles.