A large majority of Americans prefer to “do it myself” rather than depend on a financial advisor to help them put together a retirement savings and income plan, which may be a major reason why so many feel insecure about their long-term future, according to a report by Deloitte’s Center for Financial Services.
Deloitte surveyed nearly 4,500 consumers from a wide range of age and income groups, identifying five barriers that are preventing life insurers and annuity companies along with other financial services providers and their intermediaries from more effectively reaching prospects when it comes to retirement products and services.
Our prior articles about this survey focused on the first four barriers — conflicting financial priorities, a failure to communicate effectively with potential prospects (particularly via the workplace), limited awareness and understanding of retirement-related products among consumers, and a basic lack of trust in financial services providers.
The fifth barrier is the “do it myself” mentality adopted by many consumers when it comes to preparing for retirement. As a result, nearly two-thirds of those surveyed by Deloitte (and about three-quarters of those who are 15 years or more from retirement) did not consult with a professional financial advisor for their retirement needs.
This barrier is particularly problematic, given Deloitte’s survey results suggesting that using professional advisors has a significant impact on retirement planning and security. Indeed, those with a formal retirement plan are much more likely to feel secure about their long-term financial future, the survey found. And those who seek professional advice on retirement are much more likely to have a retirement plan.
Interestingly, relatively few (13 percent) going it alone say they don’t seek help in retirement planning because they’ve had a bad experience with an advisor. Even fewer think that price is an issue, with only 12 percent asserting they can’t afford an advisor’s services.
So, what’s holding most people back from seeking professional advice?
Beyond the trust issues already addressed in our last article about Deloitte’s survey, the main reasons many choose not to consult with an advisor represent two sides of the same coin — their higher comfort level in handling retirement planning on their own, and the belief that they don’t need professional advice.
This “do-it-myself” mentality — while perhaps valid for those who have the expertise and experience in managing investments on their own — may not be the most appropriate method for many to navigate the potentially bumpy road to retirement, particularly given the survey’s findings regarding consumers’ glaring lack of knowledge when it comes to retirement products and services.
The challenge for financial institutions may therefore be to effectively identify, target and educate more of these “do-it-yourselfers” to better inform them about the benefits of professional advisory services, as well as the potential hazards of self-service.
Targeting non-consumers of professional advice presents some interesting challenges for financial services firms. Obviously, only a subset of this segment might be persuaded to engage with professional advisors. But converting more do-it-yourselfers to advice-seekers could be rewarding if executed in the right manner.
Facilitators, not sellers
The key might be to serve as financial planning facilitators and enablers rather than sellers of products, emphasizing that while consumers are ultimately in charge of their own investments, there is value in having expert advice so they are able to make more informed decisions, based on all the available options.