Data & Research November 10, 2015

Most American Adults Fear Financial Advisers

Talking to an adviser and sharing personal information could be the newest financial phobia.
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Some aspect of talking to a financial adviser scares about three-quarters of Americans (71%), according to new research released by McAdam, an independent financial planning firm. The survey revealed a number of other concerns and fears that Americans have about talking to or meeting with financial advisers. Nearly half (47%) said they were hesitant to trust a financial adviser with their personal financial information. More than four in 10 (41%) said they were concerned that a financial adviser would not be able to help them with their finances.

Cost was cited as the top concern, with nearly half of survey respondents (49%) saying they were scared that talking to an adviser would end up costing them “a lot of money.” In other words, a gap exists between people’s comfort level in dealing with financial advisers and their need for financial advice.

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The anxiety that could be preventing people from meeting with an adviser is unfortunate, McAdam points out, since most people are falling short of retirement goals. The report cites statistics from the Employee Benefit Research Institute for the median amount of 401(k) balances (just $18,433) and data from the Society of Actuaries on the percentage of the population that meet with a financial adviser (50%).

NEXT: Educating investors on the big picture.

Financial advice is often available to people at reasonable rates, according to Phil Simonides, group vice president at McAdam, especially when compared with other services they routinely pay for. “Given the complex nature of long-term financial planning, investors should take a big-picture view of the value they receive for these services,” he says.

Across the board, Millennials (ages 18 to 34) tend to be more wary of financial advisers, at 82% expressing anxiety, compared with those 45 and older (63%).

Even those with higher incomes are concerned about the cost of meeting with a financial adviser. Nearly half of those with household incomes of $100,000 or more (44% ) said they feared talking to a financial adviser would cost a lot of money. More than a third (38%) said that they were afraid that a financial adviser would give them bad news about the state of their finances.

Since some effects of the financial crisis are still felt, some investors may be understandably wary of the financial planning process, points out Michael McAdam, chief executive of McAdam, who suggests advisers get the word out that meeting with an adviser can significantly improve people’s financial state.

McAdam, with offices in Philadelphia; Chicago, Boston; Tysons Corner, Virginia; and Jersey City, New Jersey, is an independent financial advisory firm with a nationwide network.

Harris Poll conducted research online on behalf of McAdam from October 13 to October 15, among 2,009 adults ages 18 and older.

Data & Research November 10, 2015

Underestimating Creates Need to Change Plans for Retirement

Establishing realistic expectations about life expectancy and the amount of money needed is key to a successful plan for retirement.
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More than half of CPA financial planner clients who are planning for retirement underestimate either their own life expectancy (52%) or their joint life expectancy as a couple (57%), according to the American Institute of Certified Public Accountants (AICPA) Personal Financial Planning (PFP) Trends Survey.

In addition, CPA financial planners said 54% of their clients underestimated the total funds needed to retire, with 57% lowballing their potential expenses in retirement. More than three-fourths (76%) of planners said their client’s general over-spending contributed to changing their plan for retirement, with 29% naming it their number one reason.

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Health care costs, including medical expenses and medical insurance, was the second most cited factor (72%), with 24% saying it was the number one reason clients had to change their plan for retirement. The other leading responses were poor initial estimates of retirement income or spending (68%), giving financial assistance to family members (52%), and additional travel (49%).

The survey asked CPA financial planners to rate their clients’ confidence during the recent market fluctuation on a scale of 1 to 5, (with 1 being the most fearful, 3 being neutral and 5 being the most confident). Established clients of CPA financial planners (3.6) were the most confident, followed closely by clients under 40 (3.5), and clients educated about markets (3.4). Conversely, those most fearful during the market turmoil were those who had newly retired (2.3) and clients approaching retirement age (2.4).

The survey included responses from 398 CPA financial planners, and was conducted from September 2 to 22.

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