A fundamental lack of trust is one major reason why a large segment of consumers may be reluctant to allow financial services providers to help them with their retirement savings and income planning, a survey by Deloitte’s Center for Financial Services has revealed.
Deloitte’s survey of nearly 4,500 consumers from a wide range of age and income groups found trust issues to be one of five barriers preventing life insurers, annuity companies and their intermediaries from more effectively reaching prospects when it comes to retirement products and services.
Our prior articles on this survey focused on the first three barriers — conflicting financial priorities, a failure to communicate effectively with potential prospects (particularly via the workplace), as well as a basic lack of retirement-related product knowledge among consumers. Next week, we’ll conclude this series by examining the often self-defeating “do-it-myself” mentality prevalent among many consumers when it comes to retirement planning.
But in terms of trust, the Deloitte survey found that attribute in short supply among respondents. Indeed, no more than two in 10 expressed a high degree of trust in any type of financial institution. Intermediaries did not fare any better, with only 15 percent expressing a high degree of trust in financial advisors, and just 11 percent finding insurance agents and brokers to be highly trustworthy.
The survey results suggest that lack of trust for some may stem from a fear of losing control over their retirement portfolio, perhaps out of concern that financial services institutions and their intermediaries might be motivated to guide them toward investments benefitting the provider rather than the client. Such motivations might be commissions earned on investment transactions, placement with a favored provider, or the marketing of an affiliated product.
This concern is illustrated by the finding that 20 percent of those surveyed indicated they don’t trust intermediaries to provide objective advice to address their retirement savings and income needs.
Gaining such trust is imperative. The Deloitte survey found that among respondents with formal plans for retirement, 83 percent of those who have a high level of trust in advisors worked with a financial professional to help put their plan together, compared with only 32 percent of those who have a low level of trust in such intermediaries.
The trust barrier likely influences product choice as well. For example, three in 10 respondents in Deloitte’s survey said they don’t trust that institutions promising guaranteed income will be able to deliver on their commitment when the consumer retires.
Complicating efforts to overcome the trust barrier is the widespread skepticism toward advertising about retirement products and services, with only 7 percent of those surveyed characterizing ads from financial institutions as highly trustworthy.
So, how might life insurers, annuities providers and their intermediaries overcome the trust barrier?