Despite the onset of mobile apps and technologies that allow individuals to go it alone when it comes to investing, the demand for financial advisors is on the rise. That’s according to a study by LIMRA, a worldwide research, consulting, and professional development trade association to the financial industry.1
Understandably, consumer confidence a decade ago may have been lackluster due to the housing crisis and market volatility as part of the Great Recession. However, confidence levels for financial advisors in 2020 surpassed their pre-Great Recession levels (24% vs. 36%).1 That’s despite unprecedented uncertainty resulting from the global COVID-19 pandemic, social unrest, political upheaval, supply chain disruption, market swings and more.
The number of investors who work with financial advisors has nearly doubled in the past decade, growing from just 23% in 2011 to 40% in 2020.1 While the 4 in 10 consumers who use a financial advisor is a marked improvement, it still points out a glaring opportunity for advisors to engage the other 60% who do not.
Other findings in the study show considerable changes in consumer financial priorities that may point to why investors are pursuing the help of financial advisors and why others probably should. Let’s take a look.
Reducing Credit Card Debt
About twice as many individuals prioritized reducing their credit card debt in 2020 compared to 2011 (40% vs. 21%).1
Americans continue to rack up debt and, unfortunately, much of it is in the form of high-interest rate credit cards. The most recent Federal Reserve survey revealed that between 2016 and 2019, the number of families with credit card debt increased. So did the average balances, more than doubling from $2,700 to $6,300 per family, respectively.2
When clients turn to advisors to help them create a financial plan, one of the first items on the agenda needs to be a debt reduction strategy. Discuss opportunities for developing a payment plan, potential debt consolidation, and possibly negotiating with credit card companies.
Leaving an Inheritance
Compared to a decade ago, there is a 16% increase in respondents who say that leaving an inheritance for loved ones is a priority (increased from 19% to 35%).1
The Great Wealth Transfer continues to be top-of-mind for advisors and investors alike. It’s a well-known fact that the American population is aging. Perhaps that’s why there’s a greater concern over what to do with their wealth once they die, and a greater interest in seeking the help of financial advisors.
Estate planning can take on many forms, such as life insurance, trusts, wills, annuities, and more. Planning to distribute wealth to the next generation also may involve many parties, including financial advisors, tax specialists and estate attorneys. Start the conversation to gauge where clients are to begin with, and how they plan on distributing their wealth once they pass on.
Paying for Schooling
In 2020, 37% of consumers prioritized paying for children’s schooling compared to only 31% a decade earlier.1
The number of families who owe student loan debt has remained about the same in recent years. However, the median balances rose by 10% to more than $22,000 between 2016 and 2019. Other than mortgages, student debt is the largest source, in terms of dollars, owed by families.2 Parents are often the largest contributors to their children’s higher education, with some withdrawing money from their retirement accounts, savings or investments to cover college tuition. Advisors can play a crucial role in helping clients form a financial plan that includes their desire to help children prepare for the future without compromising their own.
Losing Money on Investments
Unchanged from a decade ago, about 30% of respondents list losing money on investments as a top concern and priority.1
About one in three investors say they’re concerned about losing money. That presents an opportunity for advisors to recommend products that offer risk control. In today’s low-interest-rate market, however, most “safe” investments provide meager returns.
Risk control annuities may provide greater growth potential and guarantees to help put their minds at ease. Variable annuities or registered index-linked annuities, for example, allow clients to set a limit on losses while still participating in market growth, up to a cap. Many types of annuities also allow for beneficiary designations to help support their desire to leave a legacy.
The latest data on consumer priorities combined with their increased willingness to work with a financial advisor should be an encouragement. It stresses the value of a strong client-advisor relationship and the importance of going beyond the numbers to understanding the underlying motivations.
Explore our available resources to help you connect with clients on a deeper level, including our Elevate™ Advanced Planning Resources library. It can help you address complex scenarios and develop strategies to build your business and boost your value.
1 LIMRA, Executive Summary: Low Interest Rate Task Force Research: The Implications of Low-for-Long Interest Rates on Life Insurance and Annuity Business, 2021
2 Federal Reserve, Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances, September 2020