“Investors have a ton of information at their fingertips, but that is not knowledge or perspective. That is most likely why the need for professional advice is on the rise,” said William Finnegan, senior managing director of global retail marketing for MFS. “Investors are stymied by complexity and want a financial adviser to provide insight into and knowledge from the information swirling around them.”
Almost half of investors (40%) think investment products are “overly complex,” and 34% feel “overwhelmed” by the investment choices available to them, the survey found. At the same time, 62% would like to become more knowledgeable investors, and 56% feel advisers do a good job explaining investment options.
Investor confusion can help drive growth for advisers, given the following:
• A quarter of respondents (25%) put off decisions because they are afraid of making the wrong choice;
• Half of Gen Y investors (51%) agree that investment products are overly complex, more than the 40% average for the survey and older age groups (Gen X, 39%; Baby Boomers, 40%); and
• About a third of investors (35%) agree that information they find on the Internet is just as good as what they would get from a financial adviser, with younger generations agreeing more: (Gen Y, 57%; Gen X 47%).
“Investors indicate a strong inclination to maintain at least some control over their financial picture, and we should encourage high levels of involvement.” Finnegan said. "However, that involvement brings exposure to complex ideas that financial advisers are better positioned to address. Investors are acknowledging the need for more professional investment advice to both validate their thinking and to answer their complicated questions."
Based on investor outlook, the need for advice is on the rise:
- A quarter of investors (25%) agree that their need for professional financial advice has increased in the past 12 months, with younger investors agreeing more (Gen Y, 45%; Gen X, 34%);
- More than a third of investors (36%) agree that the amount of information they have asked for from an adviser has gone up (36%). Again, younger investors agree at greater rates than the survey average (Gen Y, 63%; Gen X, 44%);
- A majority (62%) would like to be more knowledgeable about investing; and
- Most (81%) said they expect their adviser to keep them informed about new and innovative investment products.
“The asset management industry has done an excellent job creating dynamic investment solutions to help investors reach their goals, but those products are often not understood as well as we would hope,” Finnegan added. “Advisers have a clear opportunity to simplify concepts that underpin those products to help investors feel more confident about their choices and achieve their financial goals.”
The survey was conducted online February 8 to February 17 by Research Collaborative on behalf of MFS. Participants were 974 individual investors with $100,000 or more in household investable assets and 621 licensed financial advisers (either FINRA or SEC) who have been licensed for at least three years with at least $500,000 or more in annual mutual fund sales. Participants were 178 Gen Y investors, 306 Gen X investors, 314 Baby Boomers and 175 investors over the age of 65.