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January 29, 2014 at 05:00 AM
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:
- Conflicting priorities
- Failure of financial institutions to communicate
- Consumers’ lack of product awareness
- 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.
