Data & Research August 17, 2015

Working With Adviser Boosts Confidence Even Among Affluent

Even for the rich, working with an adviser to develop a written plan boosts retirement confidence, LIMRA study finds.
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Just because affluent Americans approach retirement planning with far more assets than average savers doesn’t mean they are not anxious. In a study, the LIMRA Secure Retirement Institute found nearly 70% of affluent consumers said maintaining their lifestyle in retirement was a top financial goal.

More than 80% of the affluent are confident they will be able to live their desired lifestyle in retirement, but despite substantial assets, only 4 in 10 are “strongly confident.” The reasons range from market volatility and rising inflation to living longer in retirement and unexpected events.

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The study found those who work with an adviser to develop a formal written plan to manage their assets experience increased confidence. About half of those with written plans (54%) said they were “very confident” about living their desired lifestyle in retirement.

In fact, that written plan seems to kick off a cycle of positive feelings and behavior, a kind of trust flowchart. The confidence sparks adviser satisfaction with the adviser, which fuels trust in the adviser, leading to more business. Only half of affluent consumers, however, have a formal written plan.

The study pointed out that once a written plan is in place, both adviser and client can pursue realistic planning and improve preparation for retirement. With a plan, 30% of affluent households feel “extremely well prepared” for retirement compared with only 17% who do not have a plan.

As confidence and preparation rise, the actions that follow benefit both client and adviser. Forty percent of those with a plan give their advisers perfect scores on satisfaction measures versus 14% of those without a written plan. In turn, clients have more trust in the advice they receive and look to consolidate more of their assets with their adviser: 55% of clients consolidated three-quarters or more of their assets with their adviser. 

The LIMRA Secure Retirement Institute looked at American investors at three asset levels: $500,000 to $999,999; $1 million to $3.5 million; and $3.5 million-plus. More information is at LIMRA’s website.

The Markets August 17, 2015

A Summer Lull in Participant Trading

Trading activity was light within 401(k) accounts last month, according to Aon Hewitt.
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The Aon Hewitt 401(k) Index shows there were actually zero days of above-normal participant trading activity during July—making it the first month with no above-normal trading days since August 2014.

Aon Hewitt says just 0.021% balances transferred each day. Among the 22 trading days in the month, the index reveals 12 had more money flow into fixed income than equities.

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The most popular asset classes for inflows were GIC/stable value, large U.S. equity funds, and money market, while the most common classes for outflows were target-date, company stock and specialty/sector funds. Target-date funds continued to receive the majority of new contributions into individuals’ accounts.

The index finds participants’ overall allocation to equities decreased to 66.4% from 67.0%, while future contributions to equities dipped from 66.8% from 67.2%.

July Capital market returns were mixed, Aon Hewitt says, with the large-cap U.S. and global stock indexes showing positive returns. Small-Cap equities, both in the U.S. and globally, delivered negative returns.

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