Client Resolutions

On the heels of a year uncertainty, 2012 could be a call to action

by Katie Libbe

Ms. Libbe is vice president of Consumer Insights for Allianz. She can be reached at

By All Accounts, 2011 was Volatile Year for the Economy in the United States.

A number of global issues – including the earthquake in Japan and debt crisis in Europe – caused anxiety and aversion to U.S. markets. Then, the political stalemate in Washington, D.C. led to a downgrade of our national debt, the first such downgrade in the history of the country. On top of that, the housing problems we experienced throughout 2010 weren’t getting any better. The U.S. stock market’s ups and downs throughout 2011 provided no reason for sustained optimism either.

Although the S&P 500 index finished the year in nearly the same spot that it started (closing at 1267.64 in 2010 and 1267.60 in 2011) and the Dow Jones Industrial Average grew slightly, 2011 was actually one of the most volatile years on record for the U.S. stock market. On 35 trading days, the market closed with a gain or loss of 2 percent or more, demonstrating just how uncertain people were feeling about the overall health of the economy.

This uncertainty was reflected in a recent survey about New Year’s Resolutions conducted by my company. The volatile stock market (10 percent), U.S. budget fiasco (23 percent), home prices (15 percent) and European debt crisis (5 percent) all registered as ‘worrisome economic events’ of 2011, but ‘unemployment’ actually came in as the top concern with 48 percent of the vote.

These statistics illustrate that, from an economic standpoint, people had to digest a lot of negative news last year, which we believe should have an effect on the way they plan to manage their finances in 2012 – including everything from setting the household budget to saving for retirement. It also begs the question of whether or not they’re seeking help from a trusted financial professional to assist with their retirement strategies.

Sadly, it doesn’t seem that 2011’s headlines were enough to convince people that help with financial planning should be a top priority for the new year.

When asked if 2011’s economic conditions made them more or less likely to seek the advice of a financial professional, 80 percent of respondents in the Allianz Life survey said they were either ‘unsure’ (49 percent) or ‘less likely’ (31 percent). Furthermore, when asked if they were going to include financial planning in their resolutions for 2012, that same 80 percent said ‘no.’ This lack of financial focus is at the highest level in the survey’s three-year history, exceeding the 67 percent of Americans who chose not to include financial planning when making resolutions in both 2009 and 2010.

Barriers to Financial Planning
Although those responses seem troubling, a look behind the numbers is where there is truly cause for concern.

Respondents who answered ‘no’ were also given the opportunity to provide feedback about why they were not focusing on financial planning. Nearly a quarter (23 percent) noted that they already have a solid financial plan, which is certainly positive news, but the other responses should have financial professionals searching for ways to make connections with the disenfranchised majority.

Although some felt that financial planning was ‘too complex’ (6 percent) or said they would rather spend their money on ‘fun activities’ (5 percent), the biggest reason cited for avoiding financial planning was the feeling that they ‘don’t make enough (money) to worry about’ financial planning (35 percent). This attitude that financial planning is only for the wealthy is alarming not only because it puts planning on an unnecessary pedestal – it also stunts the process and makes it challenging for real financial planning to ever begin.

What's left is personal savings. People are now being required to shoulder the weight of saving money for the future.

This all comes at a time when Americans are expected to generate a bigger portion of their retirement income than ever before. The traditional three pillars generating retirement income in the U.S. – defined benefit plans (pensions), Social Security, and personal savings – are rapidly changing, forcing people to re-evaluate how they plan to fund their retirement and where they can look for guarantees. Defined benefits plans have declined substantially in the past 15 years as employers have determined these plans are too costly and carry too much long-term financial risk for the company. Longer life expectancies and the decreasing ratio of workers to beneficiaries will likely change how Social Security pays out in the future.

Thus, what’s left is personal savings. People are now being required to shoulder the weight of saving money for the future. They must ensure their savings grows along with things like inflation and rising health care costs and turn those assets into income they can’t outlive.

You’d think that reality, along with the shaky economy we experienced in 2011, would have more people looking for help with their financial plans. But when asked in the survey about the most important focus area for 2012, a majority of Americans (45 percent) said that health/wellness was their top priority. Financial stability came in a distant second with only 30 percent of the vote.

Health and Fitness are Still the Focus
Diet and exercise was also the top resolution that people said they are most likely to keep this year. Forty-nine percent of respondents felt more confident in their ability to stay fit than to ‘manage money better,’ which came next at 43 percent. While getting in shape and living a healthier lifestyle will always be a part of New Year’s Resolutions, this time of year is also a great opportunity to think about financial stability and preparing for the future. Physical fitness is certainly important, but fiscal fitness needs to play a bigger role in how people plan to make improvements in their lives.

Given everything that happened from an economic standpoint in 2011 – on both the macro level with the U.S. budget standstill and volatility in Europe, and the micro level with people affected by high unemployment and decreasing value of their homes – it’s surprising that financial planning is not a bigger priority for Americans in 2012.

Seeing health concerns grabbing more attention – despite all that happened in 2011 and the changing retirement landscape – shows our belief that many people are feeling powerless about managing their finances.
So what can financial professionals do to make an impact and demonstrate the value they can bring during these uncertain times?

Financial Planning Starts with You
It seems there is still some uncertainty about working with a financial professional and people see barriers that may not actually exist. There are many financial models that can work with a variety of budgets, so our industry needs to do a better job of promoting those options to different types of potential clients.

Free financial tools that people can access online also provide a way to start the process. That first step could be crucial in getting these holdouts to start thinking more proactively about managing their money, and eventually, about the wisdom of working with a professional that can help them navigate through the ins and outs of the financial world.

The key is to help them get started now. Just because a majority of Americans are saying they’d rather not spend time on financial planning this year doesn’t mean you have to accept their lack of interest.

This industry knows the dangers of ignoring financial planning, and we have the talent and resources to help people plan for a more secure retirement. It’s time we take the situation into our own hands and resolve to make a difference in 2012 – because if we don’t, it seems that most will lack the motivation to take action themselves.