All you advisors out there, start advising!
It looks as if the build-it-and-they-will come approach to providing investment advice is going to need some more work.
Only 19 percent of workers and 25 percent of retirees report they have obtained investment advice from a professional financial advisor who was paid through fees or commissions, according to the new Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) and Greenwald & Associates.
The 2014 numbers are slightly lower than in 2013, when 23 percent of workers and 28 percent of retirees reported obtaining investment advice from a professional. In 2012, the numbers were 21 percent and 24 percent, respectively.
Said differently, a jaw-dropping 75 percent or so of workers and retirees are not obtaining investment guidance from a professional.
Even among those who did obtain investment advice, the 2014 study found that only 27 percent of workers and 38 percent of retirees followed all of it. The rest followed most or some of it, though 7 percent of workers and 2 percent of retirees said they followed none of it. A key reason given for not following all of the advice was “not trusting the advice” (34 percent).
This has happened despite industry efforts in recent years to beef-up access to advice services, much of it focused on retirement savings advice and strategies. Some employer plans do offer online advice; a few offer access to face-to-face advice from professionals. Increasing numbers of retail advisors have made retirement planning their specialty. All are supported by trade associations providing education and credentialing programs.
The new finding has to be disappointing news for all concerned. If the large majority of American workers and retirees are not obtaining advice, and if a substantial proportion of those who do obtain advice discount some or all of it, that’s a problem in need of a fix.
The researchers point out that those with higher levels of financial assets are more likely than those with lower levels to have obtained advice. But they say it is unclear whether this is because higher-asset individuals feel a greater need for investment advice, have better access to professional advisors, believe professional advice increases the likelihood of building asset levels, or are better able to afford it.
Plenty of studies exist that demonstrate that those who do get advice tend to become savers. For instance, LIMRA’s Secure Retirement Institute found that 78 consumers who work with an advisor are more likely to save for retirement (78 percent) compared to those without advice (43 percent), and that consumers with an advisor are more likely to save at higher rates, contributing more than 7 percent of their income into a retirement plan.
This is an egads! moment. Time to figure how to get more advice to more people.