Data & Research December 14, 2021

Financial Actions Taken During the Pandemic Are Enduring

While surveys find many Americans are not making New Year’s resolutions, those who do are succeeding in making positive financial and savings changes for the long term.

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Studies show that while some individuals are focusing on improving their finances in 2022, many are passing on making New Year’s resolutions.

A consumer research survey from Voya Financial reveals that nearly one-third (31%) of Americans say they are not planning to make any New Year’s resolutions in 2022.

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Fidelity Investments’ “2022 New Year’s Financial Resolutions Study” shows Americans were successful with their goal-setting in 2021. And greater numbers of people report being able to stick to resolutions in 2021 in all areas than in 2020; notably, 71% of respondents were able to stick with their 2021 financial resolutions, up from 58% in 2020.

“This study confirms that actions taken at the start of the pandemic—such as budgeting better and replenishing that emergency savings fund—are becoming permanent habits for many. Americans are connecting their new perspective on well-being to the way they approach their finances and, as a result, becoming more thoughtful about saving and spending,” says Stacey Watson, senior vice president of life event planning at Fidelity Investments.

Some of this financial success, ironically, may be attributed to the pandemic. Respondents to the Fidelity study reported several silver linings these past two years, with “becoming more thoughtful about saving and spending” topping the list (42%), followed by “becoming closer to family” (39%) and “becoming stronger as a person” (34%). Fidelity says this aligns with what it has observed among its clients, as the company has seen 1.6 million households engaged in planning interactions with Fidelity in the second quarter of 2021 alone, a 24% increase over the same period.

Heather Lavallee, CEO of wealth solutions for Voya Financial, says Voya is seeing a shift to more positive savings behaviors in its data as well. “More than 60% of Generation Z and Millennial workers who changed their savings rates in their workplace retirement plan during the third quarter of 2021 increased their contribution,” she says.

For Fidelity survey respondents who reported that they are making financial resolutions this year, some of the top reasons given were to achieve greater peace of mind and live a debt free life. But beyond hopes, the research suggests the simple act of making a resolution may actually have a transformative effect, Fidelity notes.

While resolutions are an important start, the goal is to keep good financial routines going strong well beyond January—and have them become lifelong habits. Based on suggestions from those who were successful in keeping resolutions this year, the key to success is the feeling good about making progress and setting clear, specific financial goals. Further, 86% of all respondents felt having a plan in place can help them better deal with the unexpected. For those who work with a financial professional, it can be helpful to set clear and specific financial goals with that person, to help set realistic milestones to achieve those goals—and ultimately, secure greater peace of mind.

“It’s amazing that taking the one relatively simple step of setting a goal can help you feel better about the direction you are headed, but this has been proven to be the case time and again,” Watson says. “Once you’ve set a goal, take the time to develop a plan for how to achieve it.”

New Year’s Resolutions Address Multiple Priorities

Nearly two years into the COVID-19 pandemic, many Americans might be seeking to refocus their priorities, Voya’s survey revealed. When asked specifically what resolutions individuals do plan to make in 2022, more than half (60%) noted an interest in improving their overall well-being, with 44% noting a focus on physical health and 31% on their mental health.

Resolutions also aren’t isolated to simply financials for the nearly seven in 10 (68%) respondents to the Fidelity study who are making financial resolutions for the new year. Across the board, Americans indicate they are also making resolutions with physical and mental health objectives at higher levels than in the past year.

The Voya study shows the financial impact many individuals felt from the pandemic still remains a reality, however. As a result, many who are planning to make resolutions noted that they plan to have a stronger focus on financial changes in 2022. A large number of individuals say they are likely or extremely likely to save more for emergencies (76%), reduce or pay down their overall debt (72%) and save for retirement (72%). These numbers are even higher for those generations that might have been more impacted financially during the pandemic, with Generation Z (89%) and Millennials (83%) noting that they are likely or extremely likely to save more in general.

When it comes to financial resolutions, 38% overall are considering more conservative goals, a number that is even higher (46%) among respondents ages 18 to 35, Fidelity reports. For those looking to save more in 2022, the objectives are somewhat split—51% plan to save for the long-term, while 49% are looking at shorter-term objectives, such as boosting emergency savings or saving for a mortgage. Among those ages 18 to 35, 62% plan to increase their retirement contributions in the year ahead, at a far higher level than older Americans (34%).

The Fidelity survey found that if a financial setback occurs, sensible solutions are holding sway. Rather than raiding their retirement account or taking out loans, Americans indicate their top solutions would be to cut back on other expenses (54%), followed by dipping into their emergency savings (39%). This is consistent with what Fidelity is seeing in retirement accounts, with a steady decline in savers taking out 401(k) and 403(b) loans.

Voya found that as individuals continue to focus on building back savings and improving their overall financial well-being, many also appear to be seeking support from their employer to help them get back on track. When asked about the importance of employer-offered benefits, the survey revealed that a majority of individuals rank the following benefits as important or extremely important: employer-sponsored retirement savings (82%); flexible work hours (77%); mental health benefits (72%); short-term/long-term disability income insurance (76%); and whole life or term life insurance (69%).

“With these findings in mind, and for those employers who are looking to help their employees as we approach the new year, we recommend considering reminding employees of the benefits and resources that are available to them at the workplace, whether that may be an employee assistance program [EAP], a resource for helping with elder or child care, or making the most of their benefits to achieve those more financially focused resolutions,” says Rob Grubka, CEO of health solutions for Voya Financial. “The reality is that we often find many individuals don’t recognize how many great resources are available to them—and many without cost—directly from their employer.”

Client Service December 13, 2021

The Role of Advisers Is Expanding

In light of the pandemic, at least 22 million Americans spoke with a financial adviser for the first time as many looked to make plans for retirement and end-of-life preferences.

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The COVID-19 pandemic has prompted a number of Americans to start speaking with a financial adviser or have legacy planning conversations within their families, many for the first time. And, sources say, this environment presents a unique opportunity for financial advisers looking to build new relationships and strengthen existing connections with their clients.

According to the Edward Jones study “The Four Pillars of the New Retirement: Tracking Update With a Spotlight on Family,” despite the toll the pandemic has taken, there are signs of recovery. A growing number of Americans now say they have had a more positive outlook on their mental health, sense of purpose, financial security and relationships with family and friends than they did in December 2020.

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Members of Generation Z—i.e., those born between 1997 and 2012—have struggled the most with mental health during the pandemic, while the Silent Generation—those born between 1928 to 1945—has suffered the least. However, Gen Z is beginning to experience some recovery, with 49% reporting negative impacts on their mental health, down from 61% in December 2020.

Americans say family relationships, as well as physical, mental and financial health, have grown even more important than before, with seven in 10 saying the pandemic has brought their family even closer together. The study found that 55% of respondents say their relationship with their family became more important during the pandemic, while 53% said the same of physical health and 51% said the same of mental health.

Edward Jones says the pandemic has also prompted a financial wake-up call, with 69% of Americans saying it motivated them to think more about the financial aspects of their retirement planning and 63% thinking more about the nonfinancial aspects. This has also led to 22 million Americans working with a financial adviser for the first time.

Over the past 18 months, Americans have faced many life changes, and many decided to trust an adviser with their finances for the first time at a time when life was uncertain, said Mike Fessler, Edward Jones financial adviser in Oregon City, Oregon. He was usually the first call from his clients as many started to lose their jobs and needed someone they could trust and lean on in their community.

Advisers can sometimes slip up on delivering the service expected of them, which could lead to the loss of a client. If this happens, it is important for advisers to not get distracted by their personal performance but, instead, focus on meeting the client’s goals, Fessler said. Advisers should understand the importance their client places on their money and make that the most important metric, otherwise they will lose the client. Building long-lasting relationships means an adviser should build a plan and base their performance on how well it’s being followed. 

Edward Jones found that the greatest financial worry in retirement is now health care, and especially long-term care costs. Previous research suggests that it may be difficult to regain control financially after an unexpected health event. More than half of adults 50 and older have no plans in place for how they would fund their health care costs. Among those with a financial adviser, the percent without any long-term care plans in place drops to 34%.

Older adults are expected to pass down $70 trillion to their families, charities and other beneficiaries over the next 25 years, the study found. The pandemic has prompted 66% of Americans to think about the kind of legacy they want to leave behind and at least 44.5 million Americans say it triggered conversations with family members about their end-of-life plans and preferences for the first time.

As more Americans start to consider both their present and future financial health and seek advice, it is important for advisers to be a part of the community their clients belong to, Fessler said. This gives them the ability to dig deep by getting to know the client on a personal level and understanding what their purpose in life is. Advisers should work to understand not only a client’s finances, but also everything about them such as their families, their wishes and their goals.

The role of an adviser has expanded, and they should be at a firm where they feel fully supported and have the tools to do right by their clients, he said. When the adviser is happy, so is the client. Most advisers have traditionally relied on face-to-face meetings, but since pandemic-related restrictions have led to virtual or hybrid meetings, it is important that firms invest in client-facing technology.

“If you don’t feel like you’re at a firm that is there for you, is completely supporting you and is built around your success versus the firm’s success, then maybe you should take a look at what you’re doing and where you are,” Fessler said.

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