Clients walking into financial advisers’ offices – or, more likely, logging into video-conference meetings – will be bringing with them more than their regular questions about their finances, goals and objectives.
CoreData’s inaugural COVID-19 Impact Pulse Check 2020 Survey reveals that advisers will need to be prepared to talk about a broader-than-usual range of client anxieties, concerns and fears, and ready to discuss strategies linked specifically to recently announced government measures, including early superannuation withdrawal and mortgage payment deferral.
A range of issues currently affecting both investors and consumers are reflected in CoreData’s COVID-19 Impact Dashboard, which will track in coming weeks and months how the Australian community is responding to the COVID-19 pandemic.
The role of financial advisers in the months ahead will be critical, with a majority of consumers saying they are more concerned about the financial impact of COVID-19 than they are about its impact on their health.
The Pulse Check survey confirms that consumers and investors alike are gravely concerned about the economic fallout from the COVID-19 pandemic. While the response from the federal government has been well-received, some remain uncertain about how it will impact them and how they can utilise the stimulus measures.
More than half (52.4 per cent) of consumers think that the government response has been good or excellent. But some Australians are unsure if they will utilise stimulus measures, with one in four (26.6 per cent of consumers, 25.8 per cent of investors) reporting that they will “maybe” utilise early superannuation withdrawal and closer to a third (34.6 per cent of consumers, 29.2 per cent of investors) saying the same about mortgage payment deferrals.
Many Australians recognise that a proactive government and community response, and apparent “flattening of the curve”, may create a relatively short-lived health crisis. However, they believe the expected impact on the global and domestic economy may be more long-lasting, and unprecedented government stimulus appears unlikely to save the country from recession.
Almost four in five investors (77.6 per cent) are anticipating a recession in the next 12 months, with three quarters (73.4 per cent) expecting the Australian economy to slow down a lot in the next quarter.
Consumers winding back on discretionary spending
More than one third (36.8 per cent) of consumers say they feel anxious, but many feel they are in a reasonable position to deal with the current threat. More than two-thirds (68.6 per cent) describe the current financial position of their household as good or OK.
Most (71.9 per cent) have already reduced their discretionary spending, with many (51.8 per cent) also limiting their outlay on essential items.
Consumers are more scared of the economic impact of COVID-19 than the potential impact on their health. More than four in five consumers (82.3 per cent) agree that they are fearful of the potential impact of COVID-19 to their personal finances and the broader economy, with fewer (74.0 per cent) agreeing with a similar statement on their personal health and that of their family.
Three-quarters (76.2 per cent) of consumers expect the public health impact to last a maximum of 12 months, compared to half (55.0 per cent) expecting the impact on the Australian economy to be up to 18 months or longer.
However, some may be underestimating the lingering effects of any downturn in economic activity. More than half of consumers (57.0 per cent) expect COVID-19 to impact their financial situation for no greater than 12 months. And half (50.4 per cent) of respondents are not worried about losing their job as a result of COVID-19.
However, some may not be as well-prepared as they think in the event that conditions worsen further. The most common safety net is personal savings (53.8%), but more than one in four (27.0 per cent) do not have any safety net to fall back on in rough times.
Investors seek safe haven in a storm of uncertainty
Investors anticipate that safe-haven assets will likely be the only positive performer in the near term. More than a third of investors (38.0 per cent) expect gold to perform at least somewhat better in the next quarter with expectations for property, Australian real estate investment trusts (AREITs) and equities much more negative.
Most investors (72.2 per cent) expect the overall investment market to be at least somewhat worse in the next quarter, but expectations are even bleaker regarding business conditions, with more than nine in 10 investors (91.6 per cent) expecting conditions to worsen.
Cash is king for those hoping to ‘buy the dip’ and take advantage of the current bear market. Almost one in three (28.7 per cent) of those with investments are currently unhappy with their holdings. Approximately a third of investors plan to buy, or already have bought equities at historically low prices, with most justifying recognising discount prices (72.6%) and feeling as though they have the spare cash to do so (39.2%).
Of those that don’t plan to buy, three in five (60.4 per cent) say it is because they don’t have the money to act.
Whether the impact f the COVID-19 pandemic encourages more people to seek professional financial advice remains to be seen, but at least in these early stages it seems unlikely. Less than one-third of respondents (31,3 per cent) currently have some form of regular relationship with a financial adviser, and only a small number (7.3 per cent) say they will consult an adviser in the near future. However, a significant number (29.1 per cent) remain undecided.
