Fidelity research reveals true cost of pandemic

The mental wellbeing of almost half of Australians has been negatively impacted by COVID-19, while almost one in three have seen their financial wellbeing suffer, new research from Fidelity International reveals.

Fidelity’s latest ‘Pulse Survey’ explored the impact of COVID-19 on people’s finances, as well as their overall wellbeing.  It found 28.6% believe their physical health has suffered as a result of the pandemic and one in five (20.9%) their relationships with family and friends, revealing the wide-reaching implications of the health crisis.

• Almost half (45.7%) of Australians say their worry about money has increased since the COVID-19 crisis began.  One in five (22.4%) say they worry daily and one in four (26.5%) weekly.
• Almost one in three (29.4%) of those currently employed are worried about job security, far more than the pre-pandemic level of less than one in five (18.0%).  This skyrockets to 45.4% among those in casual employment.
• Worryingly, more than half of people (55.4%) say they could only last three months or less if they were suddenly made unemployed, including 16.9% who would not be covered at all.

Alva Devoy, Managing Director, Australia at Fidelity International, comments: “The first half of 2020 will long live in all our memories. Firstly, as a devastating health crisis and secondly, because of the massive impact that efforts to contain the spread of the virus have had on the real economy, as well as people’s own finances. Earlier this year, our Value of Advice report identified clear links between people’s financial and overall wellbeing.  We wanted to see if the same held true in the face of the current crisis and that has certainly been the case.”

Taking action

On a positive note, the research found that Australians appear to be making sensible choices when it comes to their finances through this period.  When asked what actions they would take to mitigate the impact of COVID-19 on their personal finances, the top choice was reducing their discretionary spending such as eating out with 63.4% saying they would do this over the next month to six months.

Just over half (54.0%) said they would reduce spending on essential items like food and clothing during the next one to six months, over other actions such as selling shares, property or other assets.

However, worryingly, 26.1% of people say they plan to take the opportunity to access their superannuation early in the next 12 months. 

Value of Advice

The research also showed that advice has reduced people’s worries about their finances during this period; while over half (52.8%) of unadvised people said they worry about money daily or weekly, this falls to just over one in three (36.5%) for those who are currently advised.

Advice has also had a positive impact on people’s overall wellbeing; almost half (48.8%) of those not seeking advice say their mental health has suffered as a result of COVID-19, compared to one in three (33.6%) of those currently advised.

The impact of advice on people’s long-term goals is also positive, with 72.1% of those who are currently advised saying they feel ‘reasonably’ or ‘very’ prepared for retirement, compared to just 29.5% of those who are currently unadvised.

Alva Devoy continues: “The pandemic has changed the way many of us live and work. For the more fortunate, this might provide opportunities to save or spend in a more considered way. However, for many, it is causing significant worries from job security to the impact of market volatility on savings. 

“While we cannot predict how this current crisis will develop, there are steps individuals can take to mitigate the impact on their own finances, reduce their worries and improve their overall wellbeing.  Taking a long-term view will be key.”

Anthony Doyle, Cross Asset Specialist at Fidelity International, added: “The Australian economy faces some significant headwinds in the immediate future and our Pulse Check survey shows this is clearly contributing to people’s worries. With households likely to tighten their belts in a recessionary environment, the hope of a consumer-led recovery is greatly reduced.

“Given the outlook, it is important that savers understand the ramifications that the current low-interest rate world will have on the future prospects for their portfolios. Cash, government bond and high-quality investment grade corporate bond returns are unlikely to compensate long-term investors for the rising costs of inflation. Unfortunately, we now face an environment where the concept of risk-free return is an historic concept.

“Increasingly, Australian investors will be required to take more risk to achieve their investment goals, meaning higher yielding asset classes like Australian and global equities are likely to see growing inflows in the years to come. Additionally, we expect that in the current investing environment active investment management will become increasingly important to investors. Growth outcomes are likely to be volatile, meaning there will be clear winners and losers at a country, sector, and company level. The ability to generate alpha by identifying the long-term winners, and avoiding those companies that face a more challenging outlook, will be key.”