July 22, 2013

Clients Are an Advisor’s Biggest Competition, Says Principal Survey

For 80% of clients, the top financial dream is security in retirement, yet many live beyond their means and don’t save enough

Advisors’ biggest competition comes not from other advisors but rather from their own clients’ human nature, which poses obstacles such as inertia, fear, overspending and undersaving, according to the results of a Principal Financial Group study released Monday.

Key findings in the Principal Financial Well Being Index show that for 80% of clients, their top financial dream is financial security in retirement, and for another 77%, the top dream is an overall sense of financial security. Good health, travel and living debt-free round out the top five financial dreams.

Yet advisors say that clients’ top financial blunders include living beyond their means, at 24%, and not saving enough, at 15%. A total of 616 financial advisors participated in the nationwide survey, which was conducted online by Harris Interactive in the second quarter.

“Financial planning doesn't have to be so hard. The most effective advisors help clients envision their financial future,” said Tim Minard, senior vice president of distribution at The Principal, in a statement. “They help clients reverse the financial lethargy that got them stuck in the first place. Even small actions can result in financial success over time, which is why it’s critical to engage an advisor and start financial conversations early and often.”

Advisors save clients from their worst instincts because they help both individuals and business owners develop plans to save for the long term, invest and grow their nest eggs, protect their assets and manage their income during retirement, Minard added.

Other key findings show that 65% percent of advisors say clients most often stretch the truth about living within their means, followed by 44% saying that clients fudge the facts on just how much debt they have.

As for advisors’ own practices, 51% of financial professionals reported that dealing with regulatory and compliance issues is the single greatest pain point in their business, followed by economic uncertainty, at 39%, and then market volatility, at 37%.

Over three-quarters of advisors rated themselves as “healthy” or “very healthy” when judging their own overall financial health, physical health and the financial health of their business, according to the Principal Financial Well-Being Index, which studied advisors’ recommendations for clients as well as the challenges that advisors themselves face.

Though the majority of advisors viewed their business as healthy, only 14% said they have had their business assessed for its value and only a third have created a succession plan.

The Principal, based in Des Moines, Iowa, had $456 billion under management at March 31. The firm offers retirement services, insurance and asset management to approximately 19 million customers in the U.S., Asia, Australia, Europe and Latin America.

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Read tax lawyers Robert Bloink and William Byrnes in Time Is Running Out for Social Security’s File and Suspend – Cash in Now at ThinkAdvisor.

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