Author Katrina Shanks, CEO Financial Advice NZ. Article originally published in Insurance Business Magazine.

OPINION: Financial Advice NZ launched in 2018, and since then, our sector has been at the forefront, witnessing the financial challenges that Kiwis have grappled with – from pandemic aftershocks to the current cost-of-living crisis.

It’s worth noting that inflation isn’t unique to New Zealand; it’s a global challenge. For example, a recent Australian survey highlighted that 56% of families are experiencing cost-of-living distress beyond normal levels.

So, it’s not just our issue – but it is our issue, nonetheless. And quality advice can help alleviate it. Here’s what recent local data tells us about the depth of these struggles, and how advisers can best help Kiwi families navigate these uncertain times.

Financial resilience put to the test

According to Stats NZ, in the year to June 2023, household living costs jumped 7.2% for an average household, with grocery and interest payments being the biggest contributors. Kiwis’ financial resilience is being tested, possibly even more than at the height of the pandemic.

New data released by Te Ara Ahunga Ora Retirement Commission confirms this assumption. It reveals that 55% of Kiwis surveyed are experiencing financial concerns – up 17% from February 2021 and the highest level since surveying started. What’s more, the impact is not uniform: 61% of women (compared to 48% of men), 60% of Māori, and 58% of Pasifika are struggling financially.

This, of course, is also having an impact on Kiwis’ personal well-being: 60% of respondents reported experiencing financial stress within the past year, including 75% of 18-35-year-olds, 76% of Māori, and 78% of Pasifika.

It’s worth noting that the ripple effect of this situation extends well beyond today. It means Kiwis’ capacity to save and create a brighter future is reduced. I see it as a call to action for all of us – the advice profession, financial services, and the political party that will lead New Zealand in the next three years.

On our part, we know that with quality advice and the right tools, Kiwis can carve a path to financial security. What we need is for more and more people to understand that we’re here for them.

Protecting homeownership

New Zealanders have always had a love of property, but in recent years, owning a home has become a source of stress for many, especially those who might be in negative equity.

According to CoreLogic, mortgage repayments continue to eat away at a sizable chunk of the average household income. As Kiwis watch the end of their fixed-term mortgage rates, on average repayments currently account for 49% of income – well above the long-standing average of 38%. It’s evident that owning a home is no longer just about building wealth over the long term, but also about financial resilience in the ‘here and now’. The risk is for many families to find themselves unable to make repayments, but also unable to sell without losing part of their initial deposits.

We expect that these tight financial conditions will prompt households to assess their expenses and seek areas to reduce costs. That’s where the value of insurance, more intangible than other tools, can be overlooked – just when it’s needed most.

The impact of the unexpected is even bigger on a family already balancing on the edge with their mortgage repayments. And without adequate cover, the ability to continue mortgage payments after a sudden life event becomes a steeper challenge.

Now more than ever, it’s essential to explain the value of insurance beyond mere numbers – as an investment in priceless peace of mind. By reviewing clients’ insurance plans and stressing the importance of retaining coverage in uncertain times, advisers can help them strengthen their financial position.

The path ahead: Taking charge of financial well-being

There was a silver lining in Te Ara Ahunga Ora’s research. Kiwis are being proactive and focused on improving their money management skills – whether that’s budgeting, saving, or tackling debt.

This is good news because the current financial landscape calls for adaptability. As Charles Darwin once said of evolution, “It’s not the strongest or the most intelligent who will survive, but those who can best manage change.” Incremental shifts in financial behaviours, coupled with long-term vision, can lead to transformative outcomes. Even small changes can make a big difference down the line.

So, I believe that the journey ahead requires reflection. Taking a pause, reassessing, and reaching out for help when needed. At Financial Advice NZ, our commitment is unwavering: to champion the pivotal role of quality advice in guiding New Zealanders through these challenges.


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