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Advisors: Get clients off the ‘do it myself’ retirement path

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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.

See: Revealed: The 5 biggest barriers to retirement planning

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.

Also, to drive home the need for professional advice, new marketing and advertising campaigns could be deployed to point out the risks of “doing-it-myself” when it comes to something as critical and potentially complex as retirement planning.

Following the lead of ad campaigns in the personal auto insurance market, such messages could be delivered in a humorous, entertaining fashion, such as the disastrous results that might occur by deciding to “do it myself” in home and auto repairs, making one’s own clothing, cutting your own hair, and other funny but telling scenarios.

In conclusion, the retirement challenge facing many Americans seems increasingly more daunting. Efforts to help consumers meet these challenges appear to have resulted in limited success, judging by the general lack of preparedness among survey respondents, knowledge about the options available, and trust in the financial institutions and professionals offering retirement solutions.

This sorry state of affairs, despite the billions of dollars spent by the retirement industry on sales, marketing and advertising of retirement products and services, presents quite a paradox.

There is perhaps no one easy solution for overcoming the five barriers outlined in this series of articles. But one of the first steps might be to convince more people about the need to be disciplined and start putting a retirement plan in place. Such changes in attitudes and behaviors are not easy to achieve and will likely take time. But the key is to initiate these changes sooner rather than later.

To encourage more consumers to start the planning process, the industry’s approach likely needs to be more holistic in nature, taking into account a broader array of financial considerations that are relevant to most individuals. Retirement goals should not be addressed in a vacuum, oblivious to the more immediate, pressing financial demands burdening most people.

Part of this process could involve addressing a consumer’s financial priorities sequentially — conducting a financial triage of sorts, tackling the most immediate priorities without ignoring longer-term concerns such as retirement.

Instead of taking a narrow, product- and sales-centric view in addressing retirement needs, Deloitte’s research suggests that a different approach emphasizing holistic advice and service-oriented solutions might be more productive, both for individual consumers and the industry. This is likely a new way of thinking not only for many consumers, but also for financial services providers.

Last but not least, the workplace is potentially fertile ground to begin holistic conversations about retirement and related concerns. But such an approach can also be effective when contacting prospects individually outside of their jobs, as well as those who do not have access to employer-sponsored retirement options.

Retirement planning is probably one of the biggest financial challenges most consumers will ever face. The majority likely requires help to set the stage for a financially secure retirement — even if many of them don’t yet recognize that need, or think they are better off handling their own portfolios rather than receiving assistance from a professional advisor.

For a variety of reasons revealed in Deloitte’s survey, too many Americans either are not adequately preparing for retirement or believe a successful plan is beyond their capabilities. Too few are turning to professionals for advice and solutions.

Ultimately, it is the consumer who must take responsibility for and control of their own retirement destiny. But financial services firms can perhaps better facilitate the retirement planning process by rethinking their operating models and approaches to more effectively meet this challenge.

A full report on what the Deloitte survey results have to say about overcoming all five barriers — “Meeting the Retirement Challenge: New Approaches and Solutions for the Financial Services Industry” — can be accessed with this link. The numbers for this report were crunched, sliced, diced, analyzed and visualized with the essential support of Deloitte’s Data Analysis Team, including Rahul Bagati, Nikhil Gokhale and Aditya Udai Singh.

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