Financial services, wealth management and well-being are coming together

A better deal for Australians: Unifying financial services, wealth management and well-being

We all want to live well. In fact, we all have a right to live well — we all have a right to enjoy life and experience the things that make living so special. In recent years, it seems like more and more people are tuning into this desire and this right, which is why concepts of well-being have become so prominent. But there are many different types of well-being, and all of them are intrinsically linked to one another.

Physical and emotional/psychological aspects are perhaps what most of us think of when it comes to well-being. But what about social well-being? What about developmental well-being — the idea of being on a continual path of improvement and growth? And, crucially, what about financial or economic well-being?

In fact, all these different components are connected. It’s almost impossible to achieve broader well-being without a foundation of financial well-being, and — while financial well-being may represent different things to different people — we all need some degree of economic stability if we are to live well.

This is why financial services, wealth management and well-being are coming together. Individuals and institutions alike are becoming increasingly switched on to the idea of financial well-being, partly because of the worrying signals coming out of Australia at the moment. These signals suggest a change is needed — and fast.

Australians are weathering a financial well-being storm

According to findings from the Commonwealth Bank and the Melbourne Institute, around a quarter of Australians “do not enjoy life” because they are not properly managing their finances. An even greater number of Australians — around 31% — said they were not on course to achieve financial security for their future.

A 2021 survey conducted by ANZ reached similar conclusions. In this survey, only 29% of respondents achieved a status of “no worries,” which translates to a financial well-being score of more than 80 out of 100. Around 11% scored 30 or below, with a status of “struggling,” while 17% scored between 30 and 50, for a status of “getting by.” Of these individuals, the 28% who scored 50 or below were far more likely to suffer physical, emotional and psychological health issues than their counterparts in the upper 50%. This illustrates just how critical financial status is to other aspects of well-being. 

According to the ANZ research, the majority of Australians are experiencing some anxiety or concern about their financial stability in the future. Eighty-six per cent of respondents in the “struggling” category said they had experienced these feelings, falling to 63% in the “getting by” category, and 43% of people classed as “doing ok” – i.e., people with a financial well-being score of between 50 and 80 out of 100. In fact, even those in the “no worries” bracket were not immune to anxiety for the future, and as many as 13% of these individuals admitted to feeling worried. 

While feelings of future stability are directly proportional to the individual’s current status, no one is immune to financial well-being issues.

A new landscape to integrate financial services, wealth management and well-being

New and improved financial instruments are required to support better well-being for all Australians. These instruments must be fit for purpose in today’s market, and designed with the unique concerns and considerations of the present day in mind. They must also be geared towards “whole of life funding” — providing Australians with the foundation they need to enjoy life, no matter what stage they are currently at.

This is certainly achievable. The average home value for an Australian retiree is $1.1 million — significantly above the median dwelling price of just over $752,000. During their working years, Australian property owners with a home at the current median level can expect their equity to appreciate significantly, leaving them with a very high-value asset indeed. In other words, the current situation for many Australians is one of “asset rich, but cash poor.” it’s not a question of wealth, but rather how this wealth is managed — with proper management, more Australians can achieve the financial security they desire.

This shows us how integration of financial services, wealth management and well-being is critical in supporting Australians for tomorrow. Australians need a way of leveraging their asset wealth, translating this into liquid cash flow in a sustainable and responsible manner. They need new financial services that will support this leveraging of assets, which will, in turn, support the financial well-being they need to live happy, fulfilled, secure lives.

Whole of life funding with the Equity Preservation Mortgage

We developed the Equity Preservation Mortgage (EPM) as a way to foster a more profound connection between financial services, wealth management and well-being. With the EPM, individuals can achieve whole of life funding, eliminating much of the anxiety and worry that come with planning for the future.

For those who are still working, the EPM can be used to top up the superannuation fund, adding around $25,000 annually when the mortgage is taken out against a $750,000 home — roughly the median for Australian property owners. Between the ages of 20 and 40, roughly $1M is added to the super balance, and more than $893,000 is built up in equity.

From age 40 to 55 — in the late career phase — the EPM is used to purchase deferred annuity premiums, securing a private pension of $25,000 per annum following retirement. More than $607,000 is added to the property in equity during this period, and a further $162,000 is added during the transition to retirement phase — age 55 to 60. During this last phase of working life, the EPM is used to top up income and ease the transition into retirement, as well as to purchase RAD Savings Bonds for later in life.

Following retirement, the EPM provides $30,000 per year, tax-free, based on the average Australian retiree’s home value of $1.1M. Meanwhile, the individual continues to build equity in their home. RAD bonds can be used to fund aged care later in life, or the EPM can be used to purchase DAPs instead. Alternatively, the individual has the option to remain in their home, and may revalue the property and receive an increased annuity if their situation permits.

Futureproof’s Equity Preservation Mortgage: Supporting financial well-being for Australians at all stages of life

All of this helps Equity Preservation Mortgage customers to achieve the right financial services for them, their family, and their future. Australians have a great many options when it comes to achieving financial well-being and retirement security, but many of these options are simply unfit for purpose. With the Equity Preservation Mortgage, we hope to redress this balance.

The Equity Preservation Mortgage will be released in Australia in 2023.