Advisors matter

LIMRA recently tested Americans’ financial literacy and I have to say, while I was not surprised by the results, I was certainly disappointed. A third of Americans answered less than half of the answers correctly, and when asked to measure their own level of knowledge, the majority said they had little to no knowledge of financial matters.

Why does this matter? Behavioral economic research suggests when people are unsure what to do with their finances, they often do nothing — and certainly our research attests to that. More than 50 percent of US households say they need life insurance, yet fewer than a quarter will actually shop for it in the next year. Half of Americans are not contributing to a personal retirement plan, yet two-thirds say they are concerned they aren’t saving enough for a secure retirement.

Today, consumers have more access to information than they ever had in the past. The Internet offers pages and pages of information about financial products and services. There are financial advice columns and calculators available online, all targeted at helping consumers make the right financial decisions. So why are fewer Americans protected against the risk of living too long, dying too soon or becoming disabled? I believe — and behavioral economics proves — that information alone will not provoke people to take the steps to ensure they and their families are financially secure.

Advice matters

LIMRA research has shown that consumers who use advisors are more likely to save for retirement (78 percent vs. 43 percent), they are likely to save at a higher rate (61 percent vs. 38 percent) and more feel confident that their savings will last throughout their retirement (71 percent vs. 43 percent). This is great news. We finally have solid proof that advice matters.  Unfortunately, the most common advice model — commission-based advice — is under attack and the casualties are likely to be middle income consumers.