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Advisors and Clients Have Very Different Views on Money Management

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Clients at all income levels can benefit from budgeting, advisors say.

Financial advisors and consumers don’t see eye to eye on spending and saving or on budgeting and managing money, according to new research by the Certified Financial Planner Board of Standards in collaboration with Heart+Mind Strategies, a consulting firm.

Seventy-eight percent of consumers surveyed said it was easy to save money, but only 39% of advisors agreed. Similarly, 88% of consumers believed it was easy to manage money, while just 30% of advisors agreed.

“Just like a doctor needs to know a person’s symptoms before making a diagnosis, so does a financial advisor need to know what a consumer is spending and saving before developing a comprehensive financial plan,” CFP Board CEO Kevin Keller said in a statement.

“While there may be some hesitation by consumers to ask for help, if financial advisors don’t proactively engage them on budgeting and cash flow needs, they are missing a clear opportunity to help their clients take control of their financial futures.”

The study was based on an online survey conducted Oct. 25 to Nov. 2 among 133 full-time financial advisors and a national sample of 300 adults between 35 and 65 years old, who were the primary or shared decision maker for personal finances and had investable assets of at least $100,000.

Advisors in the survey said more cash flow management, or budgeting, would benefit consumers, many of whom do not see this as important.

Forty-eight percent of advisors said clients with a mismatch between their spending and their overall goals would be helped most from cash flow management.

A fifth of advisors said budgeting would benefit clients who have a low awareness of their spending, or ones who need to see the effect of saving more or spending less on future goals.

Virtually all advisors agreed that clients become more confident and secure about their financial futures by developing a budget and performing cash flow exercises. But doing so can be a challenge.

Clients often withhold data, provide inaccurate information or resist adjusting their habits, the research showed. Nevertheless, advisors continue to see it as a critical component to successful financial planning.

Three-quarters of firms in the survey said they provided some form of cash flow management, and more than half included it in a client plan all or most of the time.

“Understanding earnings and expenses are core to financial wellness at every income level,” Keller said. “Even though budgeting can be a time-consuming process, it’s well worth it.”

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