Advisors Maintain Tenuous Hold On Workers, Retirees

By Cyril Tuohy

InsuranceNewsNet

Fee- and commission-based financial advisors have a tenuous hold on workers and retirees when it comes to dispensing advice, even with workers’ confidence in securing a comfortable retirement at historical lows, according to the latest Retirement Confidence Survey released by the Employment Retirement Benefits Institute (EBRI).

Only 23 percent of workers and 28 percent of retirees reported they obtained investment advice from a fee- or commission-based professional financial advisor, the survey found. Of these workers, only 27 percent followed all of the advice given to them, 41 percent followed most of the advice and 27 percent followed some of the advice.

“In the research, we do see a certain amount of distrust with financial advisors, particularly after the downturn in 2008,” said Matthew Greenwald, president and chief executive officer of Greenwald & Associates, which conducted the 23rd Annual Retirement Confidence Survey in conjunction with EBRI.

Greenwald also said, however, that financial advisors contribute to retirement planning advice by offering insight that people can use, even if they elect to ignore it. “There is a plus because people do make a better decision even if there’s some distrust,” Greenwald said.

Paul R. Dougherty, a National Association of Insurance and Financial Advisors trustee, told InsuranceNewsNet that there is always a benefit to using an advisor “when negotiating the challenges of planning for retirement and then, when in retirement, how to sustain yourself in those nonworking years.”

Workers also generally have more trust in financial education provided by employers, Greenwald also said, and that means a “unique opportunity” for advisors to reach workers and retirees through employers. Workers and retirees with more financial assets are also more likely than those with fewer assets to seek out the advice of an advisor, but the reasons for that are not clear, the survey also found.

Wealthier workers and retirees may feel a greater need for investment advice, or may have been encouraged to build asset levels because of professional advice, according to the survey. Still another reason may simply be because they are more likely to be able to afford the advice.

During a conference call with reporters, EBRI Research Director Jack VanDerhei said that workers are more likely to disagree with advisors over asset allocation strategies rather than overall contribution amounts or the optimal retirement window given a worker’s overall retirement picture.

The survey also found that nearly one in two workers (45 percent) often guess at how much they will need to accumulate for retirement, and nearly one in five (18 percent) indicated they did their own estimate at how much they would need. Another 18 percent asked a financial advisor, the survey also found.

Only 17 percent of plan participants report that their employer’s retirement savings plan currently offers an annuity option, yet more than half (56 percent) of respondents think they would use such an option when they retire, the survey found.

“The concept of an annuity or a guaranteed stream of income is of real interest to people,” said Nevin Adams, director of education and external relations with EBRI, in an interview with InsuranceNewsNet. “The thing you have to get over (with annuities) is the threshold.”

Actually picking an annuity and investing in one is more complicated. “But the concept is solid and one that people are looking to,” Adams said.

The survey found that when it comes time for workers who have saved for retirement to convert their assets to retirement income, workers would more than welcome professional advice. More than half (51 percent) of the respondents considered the issue of working with a professional “very important,” and another 31 percent considered it “somewhat important,” the survey found.

In addition, about half of plan participants (52 percent) said having the financial-services company that handles their retirement plan advise them on how much to withdraw each month to help investments last through retirement would be very valuable. Another 36 percent think the service would be “somewhat valuable,” the survey found.

The Retirement Confidence Survey is conducted annually by EBRI, based in Washington, D.C., with help from Greenwald & Associates, also based in Washington, D.C. A random sample of 1,003 workers and 251 retirees age 25 and older were interviewed in January for the survey.

Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].