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Retirement Planning > Retirement Investing

Is mistrust of the financial services industry killing the retirement dream?

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Countless studies have documented how ill prepared Americans are for retirement. A recent one from the Deloitte Center for Financial Services found that 58 percent of Americans do not have a formal retirement savings and income plan in place. This percentage increases the further out people are from retirement, with 70 percent of those 15 years or more from retirement lacking a plan.

Deloitte cites four reasons for this troubling state of affairs:

  1. Conflicting priorities
  2. Failure of financial institutions to communicate
  3. Consumers’ lack of product awareness
  4. A widespread “do-it-yourself” mentality

They also mention a  fifth reason that I’d like to explore now: mistrust in financial institutions and advisors. According to Deloitte, precious few Americans trust the financial-services industry. Specifically, only 20 percent of consumers believe banks to be highly trustworthy, and only 15 percent highly trust mutual funds, investment advisors/brokers or financial advisors. In addition, only 14 percent highly trust life insurers; 13 percent, annuity carriers; and 11 percent — repeat, 11 percent! — insurance agents and brokers.

Not getting objective advice

Deloitte theorizes that questions about financial providers’ ability to deliver objective advice might be a large factor behind consumer mistrust. Similarly, fears that conflicts of interest might lead to excessive fees and commissions or to being trapped in an inferior affiliate product or provider relationship.

Whatever the reason, consumer mistrust of retirement advisors, especially those coming from the insurance world, suggests dramatic steps are required to break through the mistrust barrier so that more Americans can receive the advice they need to retire with sufficient income … and pursue their retirement dreams.

Are you ready to tackle this issue? Here are some next steps you may wish to take to become the trust advisor your clients need:

First, as discussed in an earlier column, advisors should consider becoming more transparent in their marketing and sales efforts by purchasing and sharing the results of a comprehensive background check.

Second, life/annuity agents who are also licensed as investment advisors should operate as true fiduciaries rather than as fiduciaries in name only. Many agents earn their Series 65 or 66 investment-advisory licenses (RIA) solely with the goal of gaining the legal right to review client investments in order to source funds for annuity purchases. But many have failed to realize that a Series 65 or 66 imposes a fiduciary standard of care.

Third, advisors should make their ethical values and business practices the centerpiece of their market outreach. They should stress that integrity is not just a feature of their practice, but a fundamental benefit of doing business. This means that ethics should become a central theme of all marketing/sales touch points and content.

Fourth, advisors should ask themselves whether they deserve to be trusted. Do they know what they’re talking about when it comes to retirement planning? Is their goal to help their clients — not themselves — retire comfortably? And do they fulfill their promises, especially to provide continuous, high-quality client service.

Because at the end of the day, you’ll never succeed as a retirement advisor unless your clients trust you implicitly. If they don’t, their retirement — and yours — will be at risk of an early demise.

For more from Steven McCarty, see:

Would you bring a feather to a fight?

Double your speed to the close

How to succeed as an independent advisor


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