Despite perceived benefits, most Americans aren’t working with a financial professional

Although many Americans surveyed believe that working with a financial professional would benefit them, most are not doing so.

Nine out of ten (88%) respondents said that working with a financial professional would be helpful to ensure they can financially support all the things they want to do in life. But only 44% are currently working with a financial professional, according to Allianz Life Insurance Company of North America’s Annual Retirement Study.

That’s trending down from 48% in 2022 and 49% in 2021, the report said. While the decline in financial-professional usage is seen across all generations, millennials saw the steepest drop, falling 10 points in just one year (46% in 2022 to 36% in 2023),

“A key finding in this study was that while the vast majority of Americans think that working with a financial professional would help them financially support all the things they want to do in life, less than half are currently working with a financial professional,” said Kelly LaVigne, vice president of Consumer Insights at Allianz Life.

“This presents a big gap and opportunity for financial professionals. We also found that Americans really value feeling like their financial professional is offering guidance specific to them, their life, and their values.”

Among the other findings cited in the study:

• 57% of respondents said that they would prefer working with a financial professional who proposes solutions, but ultimately, they will make most of their own financial decisions.
• 33% would be more likely to work with a professional who is “understanding of my beliefs and values, and is open and knowledgeable about how these may impact my finances.”
• 30% would be more likely to work with a professional who is “empathic towards my financial struggles and meets me where I am at financially.”
• 34% would be more likely to work with a professional who “knows me as a person.”
  The study also found that Americans are looking for a financial professional who acts as a partner, not only offering professional advice, but also providing holistic guidance based on a personal understanding of their values and priorities.

Clients are not discussing important topics

Even among people who are working with a financial professional, some aren’t discussing some important subjects, including longevity and health-care costs. There are various reasons for this, according to the survey:

• 28% are using other resources to find solutions and 14% are worried the financial professional will just try to sell them something.
• 15% were not aware that their financial professional could help them with it, 17% only talk to their financial professional about things the professional brings up, and 20% don’t meet regularly enough to talk about these things.
• 23% haven’t prioritized finding a solution, 16% feel they may be judged or are too embarrassed, and 10% say professional help is too expensive.

“Financial professionals need to listen to what consumers are saying in this data,” said LaVigne. “In the past, playing to your strengths in terms of product selection may have been a winning strategy, but financial professionals need to be clear that they are open to collaboration and solutions outside of what they usually offer. It’s about meeting clients where they are, mentally and emotionally, and finding out what keeps them up at night.”

Consumers want collaboration, control

Most Americans who are currently or are interested in working with a financial professional said they would prefer to collaborate on their strategy and don’t want to give up control. For instance:

• 57% said they would prefer a financial professional to propose solutions, but they are ultimately making most or all of their financial decisions.
• 25% said they are more likely to work with a professional who views their relationship as a partnership or consultation, where they drive the direction of the services provided.

“Even though the subject of personal financial planning may feel overwhelming to many Americans, fewer are willing to completely turn it over to someone else than might have been the case in the past,” said LaVigne. “People are looking for a true partner, first and foremost.” This also means that people want a financial professional who can go beyond just crunching the numbers, the survey said. They want someone whose advice is based on a deep understanding of them as people.

And many are looking for empathy

Many Americans also said that they are more likely to work with a financial professional who is empathic:

• Understanding of my beliefs/values and is open and knowledgeable about how these may impact my finances (33%).
• Empathic towards my financial struggles and meets me where I am financially (30%).
• Makes recommendations that reflect my actual life and desires, not some “financial ideal”(39%).
• Knows me as a person (i.e., what bothers me, my particular worries or values) (34%).

“Consumers’ desire for financial advice is as strong as it’s ever been, but financial professionals need to think more broadly about their role,” said LaVigne. “To successfully serve the next generation of clients, financial professionals need to focus on collaboration, flexibility and truly understanding their clients’ values, priorities and concerns.”

Attracting more clients to work with an advisor

So, what can advisors do to get more clients to work with them so that they can move closer toward achieving their financial goals? A relationship with a financial professional is intimate – many people avoid talking about their finances even with their closest family and friends, LaVigne pointed out.

While those in the industry know all the work that financial professionals do to help their clients create financial strategies tailored to them, people who haven’t experienced working with a financial professional may not. This data signals that as much as a financial professional shares the financial outcomes a potential client may see from their guidance, they also need to hear about the relationship.

“Clients want to hear that a financial professional will act as a partner, offering guidance and collaboration but letting the client make the ultimate decision,” LaVigne added. “And clients need to know that they are receiving personalized guidance for their specific life and financial circumstances. Because finances are so personal, people don’t want to feel like they are going to be getting pushed toward some “financial ideal” that doesn’t work for them.”

More ideas for making the client connection

Laura Varas, CEO and founder of Hearts & Wallets, also shared some ideas for connecting with more customers. Varas said that in Hearts&Wallets’ Stores & Success Metrics (June 2023) report, they found that firms that are the main source of retirement advice have over two thirds or more of the percentage of share of wallet, in comparison to share of wallet percentages in the 30-50% range where the store is not the main source of retirement advice. “So,” she said, “becoming the consumer's main source of retirement advice should be a main goal.”

Another important objective should be to get consumers into “some level of advice and service,” Varas added. Advice experiences that deliver both advice and service (even very low self-service) earn nearly double the share of wallet of experiences that do not offer advice or service. “Part of the resistance to paying might be the plethora of offerings by robo-advisors and other new entrants over the past decade or so that offered "free" services or products.” Still, she said, many consumers realize that nothing is free, as Hearts & Wallets’ qualitative focus groups have told them. “Some consumers recognize that float, order flow or proprietary products are ways “free” products and services make money. Advisors should be clear about their pricing and their value proposition.

Advisors should also recognize that consumers, especially younger ones, may want different ways of pricing. Nationally, flat fees have grown to be nearly as common as basis points (bps), at 15% and 16% of relationships, respectively, Varas said. And lower-asset customers report that flat fees are used in nearly 1 in 5 relationships, as shown in Hearts& Wallets’ Wants & Pricing report (Feb. 2023).

“Financial advisors who price in basis points should take time to explain what they do to earn those bps. Investment managers watch markets basically 24/7,” Varas said. And, she added, “talk about additional services even if they are offered through third-party vendors for things like estate planning and tax optimization. Certain customers want those and are willing to pay.”

In addition, advisors should recognize that newer entrants are upping their game, and their fee structures may be very different. Varas said that Acorns offers saving and investment in one app, and at its premium tier at $9/month, provides $10,000 in life insurance for eligible customers and a no-cost will (a $259 value). But Acorns doesn't offer a human advisor.

“Consumers like a mix of human and online resources,” Varas said. “Our Advice & Technology report finds half (49%) of all households use both online and financial professionals as sources for investment information and advice. Most of them (81%) integrate these sources in ways like validating, monitoring, dividing accounts or double-checking. This mixing of online and financial pros is especially true for more educated consumers. “

Consumers are using multiple sources of information and advice, Varas added. “Make your firm a destination by offering third-party information on your website so customers can check multiple sources without going outside your company. Communicate what you do and how you add value. And keep your eye on pricing.”

Allianz Life conducted the 2023 Annual Retirement Study online survey in February and March 2023 with a nationally representative sample of 1,000 individuals ages 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) or investable assets of $150k. For more information on how financial professionals can respond to the new retirement reality, readers can listen to “Rebuilding Retirement,” a podcast series from Allianz Life.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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