Running down a dream

For such a well-worn idea, the "Australian dream" is surprisingly difficult to define. 

Such is the nature of dreams, I suppose. From the most cursory of searches, the Australian dream was once London – "the Mecca to which all good Thespians should bend their steps," as per an article in Table Talk magazine from 1897. 

Post-Federation, I found that around 50% of Australians dream of owning a racehorse (The Sydney Stock and Station Journal, 1916) and that absolutely no Australians dream of eating whale meat, which was "imagined as the sea variant of elephant meat" (The Daily Telegraph, 1933). I'm not in the habit of soliciting for comments, but I wouldn't mind getting a quick headcount to determine how well those statements hold up today. 

As far as I can tell, the first time the "Australian dream" was described similarly to its contemporary usage – that is, owning one's home – was in a Courier-Mail column from 1949. And before you judge me for beginning this piece with the most tedious of clichés (a quoted definition of the subject), hold your racehorses: the Courier-Mail article was about how Australians’ excessive “leisure spending” was impacting their ability to buy a home. 

Do you see where I'm going with this? I can't confirm whether avocado toast was a staple of Brisbane eateries at the time – even if I am fairly certain whale meat wasn’t on the menu – but it's clear that the Australian dream of homeownership, and the extent to which Australians’ profligacy endangers that dream, has been a constant throughout most of the country’s history. 

That's about to change, though. Per Iress and Deloitte's Advice in 2030: The Big Shift report, soaring prices have put the “great Australian dream of owning a home” out of reach for many Australians – particularly the younger ones. Over the 10 years to 2021, the report explains, home ownership among the 25-29 age bracket dropped from 41% to 36%. And by 2036, it’s expected that just under half (43%) of Australians between 45 and 54 will not be homeowners. 

Time for a new dream, then. With the promise of 0.3 acres and a Moove struck from the social contract, Australians will pursue other avenues for achieving financial security – or, as the report puts it, “putting their cash to work.”

The research identified an “increasing number of customers [in need of] financial advice to build wealth through alternative means.” Those customers will also require assistance “navigating complexities associated with not owning the principal place of residence, especially in retirement.”

One proposed solution involves fractional property investment vehicles, which the report suggests are gaining popularity as a means of getting exposure to an otherwise-unaffordable asset class. Considering that these products can also function as a form of equity release, you’d imagine the imminent swelling of Australia’s retiree population (explored elsewhere in the report) plays a role as well.

Broadly, though, the “new Australian dream” (as envisaged by The Big Shift) is wealth and security untethered from the family home. This is framed as an opportunity for those advisers who can “adopt strategies that resonate with [younger Australians’] financial aspirations and challenges.”

Of course, part of the reason this new dream presents such an opportunity is that, unlike the old dream, it’s primarily concerned with assets and strategies that fall well within the purview of the Corporations Act.

Touch but don’t push

Now, let’s be clear: there’s nothing stopping advisers from discussing the relative merits of property as an asset class (although I’m led to believe the limits of this conversation vary between licensees). And the Code of Ethics requires consideration of a client’s “broader, long-term interests,” presumably including any property they own, when providing advice.

But things get trickier when talking about individual properties – unless they’re held in an SMSF, which makes them financial products from ASIC’s perspective – and credit services are essentially verboten without a separate credit licence. 

While the distinction between a financial adviser and a credit intermediary (not to mention the question of what constitutes a financial product) might seem elementary to Advisely’s readership, I doubt it’s nearly as clear to the average customer. In a 2022 submission to the Quality of Advice Review, FAAA (then FPA) CEO Sarah Abood noted that many “property decisions” (purchasing, renting, renovating, investing) were excluded from the definition of personal advice despite being “common areas of inquiry by consumers.” 

The submission used this as an example of the “disconnect between the professional service of financial advice and the regulation of advice as a financial product,” which Abood said was a “fundamental flaw that impacts the quality, cost and consumer understanding … of advice.”

Michelle Levy expressed sympathy for these concerns in the final QAR report. While conceding that the issue was outside of her terms of reference, she said the current framework “adds more complexity” for advice providers and is “undesirable for consumers.” 

Because of this, she argued that “credit facilities [should] be regulated for all purposes as financial products under the Corporations Act.”

Three years earlier, Kenneth Hayne made similar comments. In his final report for the Royal Commission, he recommended “steady but deliberate” changes to mortgage broker remuneration arrangements and a gradual transition towards brokers being subject to the same laws and regulations as financial advisers. 

Two years before Hayne, the Productivity Commission encouraged ASIC to “assess the feasibility of financial advisers providing advice on home loans and other credit products” so as to "expand sources of competition in home loan distribution and provide more holistic personal financial advice services to consumers."

I’m highlighting these examples to demonstrate that there’s ample precedent for the inclusion of property and home loans within the regulation of financial advice. Indeed, the Treasury consultation from 1999 that preceded the FSR Act – and note we’ve gone from pre-Federation Australia to the present to the era of Freak on a Leash and The Phantom Menace, so never say I don’t take you places – included credit facilities within the definition of a “financial product”. 

While this pupal definition was ultimately excluded from the legislation that replaced Chapter 7 of the Corps Act, its legacy lives on in the Australian Securities and Investments Commission Act 2001 – where, if you look closely, credit facilities remain a financial product to this day. 

(Incidentally, that definition in the ASIC Act was recently proposed as a substitute for the current one in Chapter 7. The author of that proposal? Albert Einstein Michelle Levy.) 

But who cares, right? If the new Australian dream eschews property investments in favour of ETFs and Bitcoin, why bring any of this up? What use does property advice have in a country where no one owns any property? 

Let’s go back to The Big Shift. 

The wave of the future 

One of the central themes of Iress and Deloitte’s research is the so-called “grey tidal wave,” which refers to the estimated $3.5 trillion in wealth Australians will transfer to successive generations over the next two decades. This transfer, which works out to around $175 billion per year, is accelerating due to Australia’s “ageing population with significant assets” and will necessitate “holistic financial advice that covers estate planning, taxation, investment management and intergenerational wealth preservation.”

The Big Shift anticipates that these conditions will prove “challenging for financial advisers,” at least partially because of declining financial literacy rates among younger cohorts (many of whom will be inheritors). 

While we can expect the distribution of that $3.5 trillion to be somewhat top-heavy – high-net-worth families are a major focal point in this chapter, after all – that’s still a lot of wealth changing hands between a lot of Australians every year. And for the time being at least, around 70% of Australian household wealth is tied up in bricks and dirt. 

Moreover, Productivity Commission research from earlier this year suggests there’s an inverse relationship between overall household wealth and the share of that wealth in home equity. Put another way: the greater your net worth, the less likely your wealth is concentrated in a single property. 

Taking this in concert with younger investors’ skittishness around property as an asset class – as well as The Big Shift’s prediction that the “low-hanging fruit of housing asset growth” will be challenged by future housing affordability policies – and it isn’t hard to imagine the “grey tidal wave” dredging up a lot of property transactions when it makes landfall. 

Should that occur, where will Australians go for advice? Consider the investors looking to dispose of their “low-hanging fruit” as well as those looking to buy the dip. Think of those other customers, those dreamers of yore, who might want to seize the opportunity to put a roof over their heads. 

All need advice, but the advice they need spans multiple regulatory boundaries – some overlapping, some conflicting. All are Australian but they are, in the end, divided by their dreams.

That’s just how dreams are, though: fuzzy and malleable, fading between images and themes at a moment’s notice. One night it’s a house and a Hills Hoist; the next, it’s whale meat and racehorses as far as the eye can see.