It should be obvious, but often isn’t: Individuals who engage advisors tend to improve their financial futures
by Kathie Andrade
Ms. Andrade is President of Individual Advisory Services at TIAA-CREF. She is responsible for leading a full-service U.S. financial retail business representing approximately 3 million clients. Visit www.tiaa-cref.org.Whether deciding where to go on vacation, choosing what kind of car to purchase or finding the best local electrician to hire, Americans have demonstrated their comfort and propensity to ask for advice on decisions – both big and small – among their family and trusted friends.
But when it comes to important financial matters, Americans need to seek advice more often, not only from family and friends, but also from financial professionals.
Regardless of how much money they make or how much they have saved, individuals are better equipped to live a full and satisfactory life after consulting with professionals who can advise on how to meet financials goals and stay on track and adjust when needed.
Misconceptions about Financial Advice
In order to further understand consumers’ attitudes and behaviors toward professional financial advice, TIAA-CREF recently conducted its fourth annual Advice Matters survey1 and found that many individuals do not fully understand the benefits of professional advice. Americans often assume that their financial status or lack of savings is a barrier to receiving this advice.
The survey results reflect a widespread misconception among Americans that financial advice is strictly for the affluent. Nearly half (45 percent) of respondents believe they need at least $50,000 in savings to seek financial advice. Of those who have never received professional financial advice, 63 percent listed “I don’t have enough money to invest” as a reason. In reality, financial advice is beneficial to anyone who is working toward a specific financial goal – whether these individuals are paying off student loans, purchasing a new home, or making sure loved ones are taken care of when they are gone.
Financial Advice Boosts Confidence and Leads to Positive Action
Navigating finances can be a daunting challenge for anyone, but having someone to help along the way gives people peace of mind and the confidence needed to plan for the future they want.
Survey findings show that respondents who met with an advisor are significantly more confident in their retirement savings plan than those who have not (78 percent versus 43 percent). We also know that the sooner someone engages an advisor, the more likely that person is to meet his or her financial goals.
Perhaps the greatest benefit of financial advice is that it encourages individuals to take the necessary steps to improve their financial future. The recent Advice Matters survey found that approximately one-third of respondents who have received professional financial advice report they subsequently changed their asset allocation in their retirement plan (37 percent), increased the amount set aside in savings (36 percent), decreased spending (29 percent), monitored their savings more frequently (32 percent) and established a plan for paying off loans or managing debt (28 percent).
Additionally, respondents who discussed retirement with an advisor are much more likely to “run the numbers” and calculate how much income they will need in retirement – 79 percent versus only 32 percent who have not met with an advisor. By discussing goals and expectations, financial advisors help their clients craft a tailored plan to reach their financial goals. Individuals who meet with professionals can get a realistic picture of life in retirement and the monthly income needed to maintain that lifestyle.
Generational and Gender Gaps
Like many aspects of personal finance, habits and perceptions of advice are not the same for men and women, and not always uniform across generations. Although the strong majority of respondents (70 percent) believe people should meet with a financial advisor before age 35, only 42 percent of Gen Y has actually received financial advice. Experts anticipate that this gap may change as an increasing percentage of Gen Y enters the workforce and starts to earn more.
In addition, the survey findings show that there is a gender gap in retirement confidence – only 35 percent of women are confident that they are saving enough to have sufficient income to last throughout retirement – far less than the 55 percent of men who express the same sentiment. Men are also significantly more likely than women to have received financial advice (56 percent versus 43 percent).
Women who do receive financial advice feel more secure about their future and take steps to improve their financial well-being. For example, the percentage of women with negative feelings about their finances drops from 63 percent among women overall to 42 percent among women who have worked with an advisor. Additionally, 38 percent of women who received financial advice said they increased their retirement savings, and 28 percent said they changed or decreased their spending.
Advice Comes In Many Different Forms
Americans seek out financial advice in many different ways depending on their personal preferences and the complexity of their financial situation. Advisors must be able to respond to their clients’ preferences and give clients more options for receiving help.
While face-to-face meetings are still the first choice – 88 percent report they find these meetings to be valuable – Americans increasingly also want access to a broad array of approaches. Other approaches include tools and calculators (79 percent), online articles (72 percent), brochures and other written materials (70 percent) and videos (68 percent).
Personalized financial advice, whether in person, online or on the phone, can help individuals better understand their finances and implications that the choices they make have on those finances – and increase their ability to live the life they want to live. ◊
(Endnotes)
1. The research was conducted by a third party between August 3 -10, 2015, via an online survey of 2,000 adults age 18 and over. The survey was not conducted among TIAA-CREF clients and the survey questions did not reference or concern any TIAA-CREF product, service or client experience. The survey results are not, and should not be construed as, a statement of a client’s experience with, or endorsement of, TIAA-CREF or the products or services it offers.
Individual Advisory Services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products.
