How is consumers’ investing confidence impacting the need for advisors?

Consumer feelings of being experienced in investing are at their highest peak since 2010, even as long-term warming trends in receptivity toward paying for advice are seen. This is according to a new market intelligence report, Attitudes & Sentiment 2024: Goals, Beliefs and Needs in an Era of Rising Financial Confidence, by Hearts & Wallets.

This year, 31% of households feel “very” or “somewhat” experienced in investing, up from 25% in 2010, the report said. Although an almost equal portion (30%) of households feel “very inexperienced” in investing, feeling “very inexperienced” is down significantly, having peaked at 45% in 2015.

Despite more households feeling very or somewhat experienced in investing, their receptivity to paid advice is still high. So, why is this the case? Consumers are feeling more experienced in investing, but that doesn’t mean they don’t value paid financial advisors, explained Laura Varas, Hearts & Wallets CEO and founder. 71% of households who say they are “very experienced” investors say they make decisions on their own. Yet, 69% of “very experienced” investors say they also rely on paid investment professionals either as “go-to,” “usually,” or “sometimes” sources of information and advice.

“Experienced investors say an important benefit of experience is knowing when to seek professional help, especially when to protect against a market downturn, and how to evaluate professional help. Hearts & Wallets has seen this in our earlier qualitative research that examined differences between experienced and inexperienced investors,” Varas added.

The research also finds long-term warming trends in receptivity toward paying for advice, Varas said. “I see value in paying for professional financial advice, whether or not I use a financial advisor today” is tied for first among the top 5 changing attitudes long-term, along with “My financial advisor is a partner to me.” Both attitudes have a net change of 22 percentage points trended over the last decade, netted to compare high agreement-disagreement. “Experienced investors understand advisors can augment their own knowledge and help them to avoid pitfalls,” she added.

Comfort with market volatility is at a peak

In addition, the report noted that risk tolerance of market volatility is at the highest point since tracking began, with 35% of households feeling comfortable in “accepting volatility in the hopes of getting a higher return.” This is up +12% ppts from 23% in 2010. Customer risk tolerance varies by store, the survey pointed out. Currently, customers of E*TRADE by Morgan Stanley, Robinhood, and Wells Fargo Advisors are the most risk tolerant.

“Be mindful of customer preferences to enhance the effectiveness of your firm’s approach,” Beth Krettecos, Hearts & Wallets subject matter expert and report co-author, said. “Wells Fargo Advisors’ clients are likely to show more interest in equity strategies, for example, while Merrill clients may have a stronger interest in fixed income products.”

The number of financial goals also rises

Also, households are juggling more financial goals than in the past, with average goals per household at a new peak of 3.5, according to the report. The No. 1 goal, emergency fund, now outranks retirement for most Americans. Among concerns, the U.S. political environment, a new concern added this year, jumped to the top. It was ranked as a high concern by 47% of respondents. Inflation remains a high concern, coming in second, with 44%. Another new concern, data security on financial websites, is also among the list of higher concerns.

Among other findings on attitudes trended over time are the rise in wealthier households who want to bank and invest at the same firm, increasing interest in asset managers behind investments, and a decrease in consumers who resist retirement assets remaining in plan. Newer themes are intergenerational finance, artificial intelligence (AI), and relationship proliferation.

Working with empowered investors

So, what are some of the steps investment advisors can take to work with this group of empowered investors as they move toward the achievement of their financial goals? Advisors can tailor packages of products and communications for design targets according to financial confidence (or anxiety for less experienced investors), said Varas. They should recognize that experienced investors may want choice in advice with different features and prices, and these options should address varying degrees of financial complexity and price sensitivity.

“Help prospects and customers make the choices that are right for them by communicating the categories of your experiences,” Varas said. “These investors want to be a part of the decision, and they often are interested in the asset managers behind their investments. Wealthier investors ($5-million-plus) are growing more receptive to banking and investing at the same firm. If your firm offers such products, communicate this option as these higher-asset customers are now more open to this offering.”

Attitudes & Sentiment 2024: Goals, Beliefs and Needs in an Era of Rising Financial Confidence analyzes consumer attitudes, sentiment, concerns and goals toward saving, investing and advice. This report is based on the Hearts & Wallets Investor Quantitative™ Database, a single dataset with over 120 million data points on saving, investing and advice behaviors from 80,000 U.S. households over the past 15 years. The latest wave was fielded from July 17-Aug. 9, 2024, with 5,989 U.S. households.

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