Recently, Nationwide Retirement Institute and InvestmentNews undertook The Planning Gap, a research initiative to help advisors better understand investors’ perceptions of retirement and identify the gap between those perceptions and what advisors actually recommend.
Besides presenting helpful insights, the research revealed several reasons advisors should take heart. Here are three that caught our eye:
1. People who plan through an advisor feel a whole lot better about their retirement prospects
Of those currently using a financial advisor, 50% say their lifestyle will stay the same during retirement, compared to only 35% of those who don’t use an advisor. We’ve seen this kind of finding ratified before: if an individual is working with an advisor, they have greater confidence in their financial future than those who don’t.
This may be because people who are in a better position to hire an advisor are also in better shape about their retirement (correlation). But the evidence we’ve seen strongly suggests that the relationship is causal: people feel better because they’ve engaged an advisor. Knowing where they stand, and being able to plan for it, often boosts their confidence and peace of mind.
2. People may be worrying about the wrong things
There are some significant gaps between an investor’s perception of risks and an advisor’s informed analysis of risks. For example, only 22% of investors worry about longevity risk while 53% of advisors bake it into their clients’ plans. Twenty-nine percent of advisors consider the cost of long-term care, while only 21% of investors are concerned about it.
Conversely, investors are almost three times more worried about health insurance premiums than advisors think they should be. And they’re about a third more concerned about market and interest-rate volatility risk than advisors are.
3. DIY investors, overwhelmingly, would consider hiring an advisor
A whopping 82% of investors who consider themselves DIY would nonetheless seek the advice of an advisor for financial planning. The principal motivator is the need for a retirement plan followed closely by the need for ongoing investment advice and guidance, developing a financial plan, trust and estate guidance and help in transitioning to retirement.
Based on the survey, DIY investors overall are unprepared for retirement in terms of planning, knowledge of maximizing Social Security benefits and tax-efficient withdrawal strategies.
The demographics, and psychographics, are in advisors’ favor. The more you can present your capabilities as a holistic solution to “life risks,” while demonstrating specific expertise in detailed areas of planning, the greater the likelihood of continued success.
Source: The Planning Gap, Expectations vs. reality: What investors think – and how advisers plan – for retirement income, © 2017 Nationwide