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Christian Mitchell. (Photo: Northwestern Mutual)

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Good Financial Habits Built During Pandemic May Be Starting to Slip: Customer Whisperer

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What You Need to Know

  • Sixty percent of U.S. adults surveyed said they have been able to build up personal savings over the past two years.
  • 69% said they expect to keep their higher savings rate in place.
  • Average participant savings fell 15% between early 2021 and early 2022.

Financial advisors can prove their value now by helping clients stick with the budgeting and saving decisions they made during the first few months of the COVID-19 pandemic.

Christian Mitchell, the chief customer officer at Northwestern Mutual, and Aaron Bell, an advisor in the insurer’s advisor network, talked about retirement savers’ mental road map Tuesday, during a briefing the company held to go over the company’s latest consumer survey.

Mitchell said he believes that U.S. consumers converged on efforts to stabilize their finances in early 2020, but that consumers may now be about to set out on one of several different paths.

Some might stick with the same, sensible path, and others may become even more disciplined super savers, Mitchell said.

But he suggested that others might simply act as if the pandemic never happened and move on, while others might decide that the world is too uncertain for them to bother to save at all.

Those consumers might say, “‘I’m just going to live my life,’” Mitchell said.

One possible sign that a significant percentage of consumers are backsliding, because of their own financial choices or the effects of the economic forces around them: Participants’ average savings reported fell to $62,000, down 15% from the average that participants in Northwestern Mutual’s 2021 survey reported.

The Consumer Survey

Northwestern Mutual is a Milwaukee-based, policyholder-owned mutual life insurer.

This year, the company commissioned an online survey of 2,320 U.S. residents ages 18 and older. The new survey period ended Feb. 17 — shortly before Russia’s invasion of Ukraine.

The company also commissioned a similar survey in March 2021.

The New Numbers

About 60% of the participants in the latest survey said they had been able to build up personal savings over the past two years, and 69% said they expected to be able to keep their higher savings rate in place.

Overall, “there’s this great story of human resilience,” Mitchell said.

But there are also some signs that some people who toughened up to get through the early months of the COVID-19 crisis are now relaxing some.

This year, for example, 22% of the survey participants said that they have started to reduce or pay down debt because of the pandemic and expect to continue that behavior in the long term.

The percentage of participants who said they have been paying down debt and expect to continue to do so is down from 34% in 2021.

Similarly, the percentage said they have been making and would continue to make efforts to cut spending has fallen to 35%, from 45%, and the percentage who said they expected to invest more has fallen to 19%, from 33%.

The Advisor’s View

Aaron Bell, a life insurance agent, investment analyst and investment advisor with Cannataro Family Capital Partners, part of Northwestern Mutual’s private client group, said he has been working over the past two years to encourage clients to use the extra time they have at home to get their finances in order.

Bell said he has sent many to personal finance education sites, encouraged them to pay down existing debt and avoid taking on new debt, and helped some realign the debt they still have.

“Anything with an interest rate is a focus,” Bell said.

In some cases, he said, he has been able to help clients replace higher-rate student loan debt with lower-rate debt.

Bell has also been trying to warn that clients that investment markets can go down as well as up, to lock in some gains, when gains have appeared, and to help clients understand financial basics, such as what their employment-related benefits are, and whether they are getting 401(k) plan matching contributions from their employers.

“It’s a marathon,” Bell said, “It’s never quick.”

The Role of Insurance

For many new financial professionals, the idea of being told, “List 100 people you know, and try to sell them life insurance,” may seem terrifying.

But Mitchell and Bell noted that, for new financial professionals, who may have never been adults in a prolonged bear market, selling life insurance is a relatively easy financial services task.

Talking about life insurance, disability insurance and related products is important for the well-being of the clients, generates steady premium revenue for Northwestern Mutual, can generate stable commission revenue for the financial professional — and is much easier for a new financial professional than persuading clients to trust the management of their life savings to a new financial professional, Mitchell and Bell agreed.

Pictured: Christian Mitchel (Photo: Northwestern Mutual)