Moving the dial on financial health: A practical framework for advisers and super funds

Financial health and related concepts are widely used in financial services, but often poorly defined and inconsistently measured. 

Terms like financial health, wellbeing, fitness, security, stability, freedom, resilience, stress, satisfaction, confidence and capability are frequently used interchangeably. The result is confusion about what drives financial health and how it can be improved. 

For advisers, super funds and financial institutions, this creates a practical problem. If financial health is not clearly defined, it becomes difficult to design support, measure progress or demonstrate impact. Promoting financial health is not just admirable its commercial. Beyond prioritising the best interests of consumers, it helps build stronger relationships and demonstrates real present value. It facilitates the efficiency and effectiveness of 'moment of truth' interactions. It lifts engagement, trust, loyalty, retention and, ultimately, funds under management.

The challenges measuring financial health

Financial health is often measured using outcomes such as savings, investments and debt levels. These measures are important. They tell us where someone is financially. However, they do not tell us how they got there, how they feel about it, or whether they are equipped to improve their situation.

Financial outcomes are the result of thousands of decisions made over many years. Circumstances differ, needs are relative and focus on outcomes alone rarely provide actionable insight. For professionals trying to support better outcomes, simply measuring balances or debt ratios provides limited diagnostic insight. A more useful approach requires understanding the drivers behind them.

What public health can teach us

Public health offers a useful analogy. Most people aspire to good physical and mental health, yet many still struggle to exercise regularly, eat well or avoid risky behaviours.

Doctors rarely rely on a single indicator to assess health. Blood pressure, cholesterol and BMI together provide a more complete picture.

However, these indicators still do not fully explain:

·       What someone is experiencing

·       Why their health indicators are poor

·       How they can realistically improve them

To unpack this, we also need to know about their dietary and exercising behaviours, their sleep patterns, the stress they may be experiencing and any negative behaviours like excessive smoking and drinking (i.e., the subjective and objective drivers of their health status).

We also need to gauge if they are experiencing any acute or chronic mental or physical pain and develop a more urgent treatment plan accordingly (i.e., stress and hardship experienced).

Finally, we must consider the principles of prevention (i.e., resilience) and empower individuals to take more control of their health journey (i.e., confidence and capability).

Effective public health systems focus on:

• Facilitating access to guidance and support

• Building capability early

• Strengthening resilience before crisis

• Reducing stress to restore cognitive bandwidth

• Building confidence and reducing friction to act

• Creating systems that make good decisions easier to sustain

• removing barriers that make healthy behaviours difficult to sustain

  
  

The same principles apply to financial health.

Demonstrating we have made a difference

Health interventions depend on the current state of health and can take time to show enduring measurable outcomes. We may not see dramatic changes in health indicators immediately but we can show real impact if we improve the direction someone’s health is heading.

For example, BMI, blood pressure or cholesterol levels may only improve gradually and lifespan can only be asserted in retrospect. However, clinicians can demonstrate meaningful progress if a patient begins exercising regularly, eating better, building greater physical resilience or experiencing less pain.

In other words, improving the trajectory of health is often the first and most important step. The same logic applies to financial health. If support and guidance improves capabilities, behaviours, confidence and resilience, it is already changing the direction of someone’s financial future. This arguably demonstrates improved financial health before outcomes are fully realised.

A practical financial health framework

A useful financial health framework should:

·       Define financial health clearly and holistically

·       Capture both objective financial conditions and subjective experience

·       Provide actionable insight to really making a difference

·       Show evidence that interventions are improving outcomes

·       Work for people at all stages of their financial journey

·       Reflect relative perceptions and circumstances

·       Align with best practice measurement approaches

Most importantly, it should help organisations demonstrate that their actions are moving financial health in the right direction.

Our research suggests that financial health can be rationalised into key drivers (financial capability and resilience) and key outcomes (financial wellbeing and status which also include their negative extremes of financial stress and hardship). The interactions of these factors leads to some circularity but these distinctions are still useful.

Why this matters for advisers and super funds

For financial institutions, measuring financial health properly is not just a research exercise. It has direct implications for how services are designed, delivered and evaluated. When financial health is measured purely through balances or net worth, organisations are largely observing outcomes they cannot easily influence in the short term. When the drivers of financial health are measured new opportunities emerge.

This approach also changes how success is measured. Instead of waiting years to see changes in balances or wealth accumulation, organisations can demonstrate progress by showing improvements in the drivers that shape those outcomes.

Financial professionals can identify where clients are struggling, tailor support earlier and design interventions that meaningfully improve financial behaviour. Good guidance is also more than just optimising decisions and navigating challenges. Its about avoiding pitfalls to prevent poor outcomes. Proactively preventing bad financial decisions has arguably never been so important as in this age of increasing scams, finfluencers, direct investing, crypto currencies, volatile markets and dodgy switching campaigns.

This means deeper relationships and more meaningful guidance to serve best interests. It also means that clients and members are primed for more valuable interactions with less effort required from all parties. They feel more confident they are asking the right questions, are more likely to follow through to action and adhere to plans. All this facilitates quality of life and dignified retirements.

These efforts in turn increase engagement, trust, loyalty, retention and funds under management. It’s a ‘win win’ for all.

The measures that matter most

The following measures provide insight into future direction, not just past performance.

Key financial health measures

DRIVERS

Financial capability - The skills and knowledge needed to make sound financial decisions.

Financial resilience - The ability to absorb financial shocks and recover from setbacks without long term damage to financial stability.

OUTCOMES

Financial status - The objective state of someone’s financial position, including savings, investments and debt.

Financial wellbeing  - How you feel about your financial situation is both a critical aspect of your lived experience of financial health and a key determinant of behavioural change. This dimension is both an outcome and a driver of good financial health.

Each outcome also has a negative extreme that requires attention.

Financial hardship -  Represents very poor financial status, is a debilitating barrier to improving financial health and signals the need for immediate support or intervention.

Financial stress - Represents very poor financial wellbeing and can become a significant psychological barrier to positive financial behaviour and can impact everyone’s quality of life, regardless of means.

These elements can also be conceptualised as the following interrelated hierarchy.

Hierarchy of financial health measures

Closing thoughts

If we are serious about promoting financial health, we need to stop treating it just as a score and start treating it as a system.

A bank or super balance tells us where someone is. It does not tell us how they got there, how they feel about it, or whether they are equipped to improve it. Real impact comes from understanding and influencing the drivers of capability, resilience and wellbeing not just recording the outcomes of financial status.

Just as in public health, the goal is not simply to diagnose ‘illnesses’. It is to prevent them, manage them early and support long term health. When advisers and super funds help build financial capability, reduce financial stress, strengthen resilience and support better decision making, they are doing more than observing outcomes. They are actively shifting the trajectory of financial health.

The shift in focus means measuring what is actionable. It means recognising hardship as a call for emergency triage, stress as a barrier to progress, and wellbeing as fuel for positive behaviour. It means designing interventions that are inclusive, practical and aligned with the reality of people’s lives.

Most importantly, it reframes the role of financial professionals. They are not simply managers of money. They are partners in preventing pit falls, guides through disruption and catalysts for long term financial confidence.

Financial health is more than a destination. It is a dynamic, lifelong journey shaped by both circumstance and choice. If we measure what truly drives it, we can do more than describe it - we can actively improve it.

In this ongoing series of blogs, we will further unpack our practical ideas and tips to help all Australians achieve a dignified retirement. This will include how to engage, motivate and empower individuals to act in their best financial (and life) interests.

Authors

Tai Rotem is a consulting partner at MYMAVINS with several decades experience in financial consumer, public health, social and behavioural change research.

Reach out to him at Tai@mymavins.com.au

Humphrey Armstrong is a specialist consultant to MYMAVINS and has an extensive background in psychological practice. He has decades of experience helping Australians navigate their transition to retirement and journey successfully through their third act.