A fintech firm which has helped brokers strengthen their clients’ money management with its tools, is encouraging further action to help borrowers understand household expenses.
The Royal Commission into banking misconduct heard that most lenders over-rely on the household expenditure measure (HEM) benchmark when assessing the living costs of a borrower. This was found to underestimate the true costs, potentially leaving many Australian borrowers struggling.
Moneysoft, which produces tools to help brokers and advisers track borrower expenses, said more needs to be done.
CEO Peter Malekas said, “The Financial Services Royal Commission has raised many disturbing issues across the banking and advice industry. It will inevitably lead to widespread and much-needed reform.
“However, we shouldn’t wait for the final report in 2019 to reassess as an industry, what we do and how we can better serve clients now. Cashflow management and budgeting are within the top unmet advice needs of everyday Australians, according to Investment Trends research. However, many financial planners are still concerned about turning that demand into a sustainable and scalable service. “
Australians’ household debt to income ratio now stands at a record 188.6%, according to the Reserve Bank of Australia (RBA). Around three in ten households were classified as ‘over-indebted’, with mortgage holders and high-income earners particularly susceptible, according to ABS data released in late-2017.
The head of the Royal Commission, Kenneth Hayne, has also acknowledged concerns about people’s ability to understand their own expenditure before making major financial commitments such as a mortgage.
Moves are now underway for financial planners to provide advice on a broader range of products, like mortgages. This was after a Productivity Commission draft report into competition in the Australian financial system raised the prospect.
Simon Rayner, a financial planner at Dynamic Orange, said money management has traditionally been missing from the advice industry.
He added, “Our industry jumped over the cash flow and having a plan that was tracked against real data and instead sold product. But this is really the core part of what we should be doing, managing cash flow, because that’s how clients make money.”
He says he recently helped one professional couple cut frivolous and unplanned expenditure, helping them save $17,000.
Moneysoft Pro delivers a complete financial money management service. It includes budgeting and cashflow, a full range of financial reports, realtime data, goal tracking, and account alerts.
Moneysoft Lite offers a more cost-effective and streamlined money management solution that includes a financial health check and gap report.
