Don’t fret, advisors, your clients still want a living, breathing human to whom they can ask questions and receive timely, informed answers.
But for the rote tasks associated with managing their investment accounts, they are fine dealing with a robo. And that is most likely the future of financial advice, said Patrick Leary of LIMRA.
Leary will deliver the closing session today at the 2016 LIMRA Annual Conference in Chicago.
Leary, who is LIMRA’s corporate vice president of distribution research, will discuss, appropriately enough, “The Future of Advice.”
The session is a continuation of a data study that kicked off in February during the LIMRA Distribution Conference in Miami. The first phase of the study consisted of focus group data showing what consumers will look for when it comes to advice in the future.
Among millennials, 17 percent were familiar with robo-advisors, while that figure dropped to 11 percent among Generation X. Just 4 percent of baby boomer respondents said they were familiar with robos.
In Phase Two, researchers got more specific with questions on what consumers value.
Focus group respondents listed trust, communication and a desire for a human advisor in addition to liking digital capabilities.
“One of the big takeaways was that you really do want the advisor who is a human advisor but also has the digital capabilities,” said Breana Macken, assistant research director for LIMRA. “So we really do see that as the future advice is going to be that digital advisor.”
Another big takeaway came out of questions on education. Simply put, investors need more of it, Macken and Leary agreed.
“Folks admit that they don’t know the products and services the industry offers beyond the very basics,” Leary said. “On the flip side, there’s a thirst for knowledge. They express a desire for wanting to learn about these things so they can take advantage.”
Respondents were asked to grade themselves on knowledge level and gave themselves a C+. This is where the robo phenomenon is a bit of fool’s gold, the researchers say.
“Robo is self-directed,” Macken noted, “so that just doesn’t go well with those folks who need that higher education.”
LIMRA focused on the “upper middle market” with its survey, Leary said. Even so, researchers found most respondents recovering slowly from the 2008-09 recession.
“They recognize that there’s the need to be saving for retirement and having enough money for a comfortable retirement, but at the same time, they’re squeezed by current expenses,” Leary said. “They’re kind of like, ‘Oh, how do I strike that balance to be able to do both?’”
LIMRA survey results match what other researchers are finding as well. A Northwestern Mutual survey released in June found that 85 percent of Americans report feeling financial anxiety.
Thirty-six percent said their anxiety has gone up in the last three years, and 28 percent said they worry about their finances every day.
‘Get Them Up to Speed’
“Spending less” was by far the No. 1 financial resolution respondents told LIMRA. And that was a very consistent desire, Macken said.
“It dropped just slightly whenever you looked at the more affluent folks, but across the board it really was spend less being the No. 1 thing,” she said. “We have to really get them up to speed on the basics before they can do some of these more sophisticated things.”
Access and education are two issues for the consumer; Behavior is an issue for the advisor. In simple terms, advisors can do a better job with holistic planning, Macken said.
“What matters to them is their family. What matters to them is their health,” she said. “Just remembering to start with that, and then realizing that the products and services that we have are really just a means to an end of what they need in their life.”
Three of four respondents said it is “the financial professional’s job to make sure consumers understand products and services offered to them,” Leary said.
Studies show consumers with no knowledge of how life insurance works overestimate its price tag by 300 percent, the researchers said. A good advisor can help overcome this misinformation.
“Advisors can help consumers understand how they can afford life insurance and ways to budget for it,” Macken said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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