Advisers Help Fill the Gaps in Retirement Planning

When asked about each of eight different products, not once did a majority of investors indicate they were highly knowledgeable, according to an IRI report.

Investors indicated the best levels of knowledge about mutual funds and stocks, with 46% self-identifying as very or extremely knowledgeable about each. The research shows mutual funds and stocks are the most commonly owned investments (owned by more than 80% each). A little more than half of those surveyed (54%) are invested in bonds, and almost four in 10 (38%) own annuities.

Tax deferral, critical to successful retirement saving and post-retirement income and investment strategies, is an important feature when selecting a retirement investment for nearly nine in 10 investors, with 35% saying it is “very important.” These findings suggest financial planners would do well to educate their clients about unfamiliar products that may be useful in helping them achieve their investment goals, IRI says.

Perhaps because of their lack of knowledge, more investors indicated they invest through a broker or financial planner (62%) than do through a retirement plan (54%) or on their own (53%). More than any other factor, responding investors indicated they rely on their financial adviser’s recommendation (28%) when selecting an investment. Past performance (26%) and rate of return (25%) are also relatively important to their decision, while safety of principal (10%) and guaranteed monthly income (4%) appear to be far less influential. According to the report, these findings suggest there is an opportunity for financial advisers to better educate appropriate clients about the benefits of guaranteed income products.

Sixty-two percent of respondents said they have consulted a financial planner. IBI says this high number perhaps can be explained by the survey group’s financial profile. Investors surveyed have relatively high income and net worth—attributes that increase the likelihood of using a financial planner.

For investors in IRI’s study who had consulted a financial planner, the most common areas of discussion were retirement planning (88%) and investing (84%). Nearly seven in 10 investors (69%) said their financial planner had prepared a retirement plan for them. Earlier research by IRI found Baby Boomers planning for retirement with the help of a financial adviser were more than twice as likely to be highly confident about their retirement plans compared to those planning for retirement on their own.

As far as helping their clients prepare for retirement, advisers said they are most often discussing the amount of savings needed (83%) and the related topic of intended retirement age (80%). To a lesser extent, they are talking about other issues that have a financial impact on retirement, such as lifestyle (66%) and long-term care planning (57%).

Most investors expressed confidence regarding their financial preparations for retirement (64%) and in having enough money to live comfortably throughout their retirement years (59%). Nearly three in four respondents (72%) have saved at least $250,000 for retirement, nearly half (45%) have at least $500,000 saved, and 16% have accumulated at least $1 million.

Fewer respondents were confident in their ability to pay for their children’s higher education (54%). Just more than half felt they could cover their medical expenses in retirement. Long-term care was a worry for many investors, with only four in 10 having any confidence that they could pay for long-term care for either themselves or for their parents.

More than half of investors said it is important to leave an inheritance. As far as when they expect to retire, more than half (54%) said age 65 or older, with nearly one in five (18%) saying at age 70 or later; more than a third (36%) said before age 65; and one in 10 were uncertain when they would retire. Investors were fairly evenly split over their home relocation and downsizing plans (47% do not plan to move to another state, and 38% do not plan to downsize their homes).

Adviser Relationships

Investors surveyed tend to have long-lasting partnerships with their financial planners, with almost two-thirds (62%) saying they have been using the same adviser for at least five years. And, they are highly satisfied with their advisers. Almost all would be likely to recommend their financial planner to a friend of relative, with half being highly likely to recommend their planner.

When it comes to satisfaction with various communication channels used by their advisers, investors rated in-person meetings at the top of the list (87%) followed closely by telephone (80%) and email (77%). Newsletters also were popular, with 66% of investors satisfied with this form of communication. Social media came in last with only a 19% satisfaction level.

These findings mirror how advisers most commonly communicate with their clients—they indicated they most often meet face-to-face (93%) and least often use social media (23%).

Contrary to popular belief, cost and trust do not appear to be major obstacles to working with a financial professional. The top reason given by respondents who chose not to consult a financial adviser was that they preferred to do it themselves (60%). Another 11% said they receive advice from a spouse or relative. Only 21% said cost was a factor, and even fewer (16%) cited trust as a reason.

The IRI report, “Retirement Planning: A Changing Dynamic - Investors Turn to Advisors for Help,” can be found here.