Study finds direct correlation between professional guidance and financial security in retirement
Northwestern Mutual's 2015 Planning & Progress Study Finds Misperceptions are Keeping Americans from Reaping Benefits of Advisors
MILWAUKEE, July 21, 2015 /PRNewswire/ — The majority (69%) of U.S. adults are taking a self-directed approach to planning which may be exacerbating already complex financial challenges, according to new findings from Northwestern Mutual's 2015 Planning & Progress Study released today.
This annual study, exploring Americans' attitudes and behaviors towards finances and planning, also reveals that U.S. adults are deeply concerned about financial security before and during retirement yet:
— Less than half (40%) have set goals for their financial future and only 12% have developed a written financial plan
— Among those with a financial plan, less than 1 in 10 (9%) are extremely confident that the plan can withstand market cycles
— 30% of U.S. adults say they are "not at all financially prepared" to live to the relatively "young" age of 75 while more than a third do not have any sense of how much income they may need in retirement
— 62% of working Americans expecting to delay retirement by necessity, citing insufficient savings as a top reason
Notably, the top catalysts for rethinking financial planning – receiving a cash windfall (59%) or experiencing an unexpected financial emergency (38%) – are reactive/circumstantial rather than proactive/systemic.
"Financial security shouldn't be left to a roll of the dice as the stakes are too high," said Steve Mannebach, vice president, field growth and development, Northwestern Mutual. "Financial health is similar to physical health – some people are in good shape and just need routine preventative care, while others might need a specialist to manage a serious issue or achieve a certain goal. Like medical professionals, advisors can help in either case. The key is just getting started."
A number of misperceptions emerged when respondents were asked why they do not have an advisor. Specifically, three in ten believe that having an advisor requires a certain level of assets while more than a quarter feel they could not afford one.
Overlooking professional guidance may be a significant missed opportunity as Planning & Progress Study data clearly underscores the positive impact of working with an advisor on establishing a secure financial foundation:
- U.S. adults who use an advisor are nearly twice as likely to feel "very financially secure" (68% vs 35%). Moreover, 7 in 10 adults with an advisor consider themselves disciplined or highly disciplined planners compared to less than half without an advisor
- 8 in 10 (79%) of working Americans who have an advisor believe they will be happy in retirement, compared to 65% of those without an advisor
- U.S. adults who work with advisors are substantially more likely to be savers, hold less debt and have a diversified portfolio of financial solutions
"Financial planning is less about how much you have in assets and more about maximizing the assets you do have," continued Mannebach. "Don't let assumptions get in the way of the opportunity to reap the significant proven benefits of working with an advisor."
Key attributes to consider
Experience (73%) and reputation (44%) ranked as the leading criteria when evaluating a prospective advisor. Interestingly, some generational differences emerged with Boomers and Matures particularly emphasizing experience, while Millennials were more likely than other generations to be influenced by recommendations from their networks (48% for Millennials vs 32% general population).