[Originally published December 2019; last updated October 2020]
When it comes to wealth planning and retirement readiness, is it better for your clientele to go about the process with an advisor or on their own? Of course, as a financial professional, you know the answer to that question. Yet, some of your potential advisees may not be fully convinced that investing in professional assistance is really worth it at the end of the day.
But as a wealth of studies suggest, those who work with an advisor to achieve financial freedom tend to be much more likely to accomplish the feat than those who don't.
These indications come from a study conducted by the Insured Retirement Institute. It examined around 800 representatives of the estimated 10,000 baby boomers who enter retirement each day, specifically as it related to whether they're beginning their post-career years in a financially advantageous position.
Just 25 percent confident their retirement savings will last
Overall, the study found that only one in four baby boomers – typically defined as Americans born between 1946 and 1964 – are optimistic that the amount of money they've saved to spend in retirement will last them for the duration of it. Additionally, the IRI analysis revealed, less than 30 percent believe they went or are going about the retirement planning process in an effective manner.
Retirement readiness is an ongoing concern in the U.S., due in part to the costs of living in a near constant state of growth. Indeed, in a separate survey conducted by Gallup this past May, 46 percent of respondents said they weren't confident about having enough money in retirement to comfortably pay for the lifestyle they're used to. This may explain why close to 33 percent of non-retirees in a different Gallup survey said they fully anticipated remaining in the workforce even after they turn 67.
"95% who work with financial advisors for guidance had retirement savings."
Confidence, savings increase substantially with wealth advisors
However, when individuals consult with a wealth planning advisor or agent, their retirement savings – and confidence – takes on a decidedly different appearance, one that's more favorable to exiting the working world in fine financial shape.
For instance, in the IRI study, 95 percent of respondents who turned to financial advisors for guidance had retirement savings, up from 91 percent in 2017. This compared to only 43 percent with savings but who prepared all on their own, up slightly from 43 percent versus a year earlier.
Not only that, but those with advisors were more likely to have at least six figures put away for retirement usage than individuals who went about the process solo. Specifically, 86 percent of people who counseled with a professional had $100,000 or more for retirement compared to less than 65 percent who had at least this amount but didn't meet with anyone.
What's more, pre-retirees are more likely to feel confident about their financial situations heading into retirement by working with a wealth planning expert. In a separate study conducted by the LIMRA Retirement Institute in 2017, these individuals were roughly two times more likely (43 percent) to feel "well prepared" for their golden years versus those who didn't.
Jafor Iqbal, LIMRA Secure Retirement Institute assistant vice president, said all signs point to the advantages advisors bring to the table.
"Our research demonstrates the value of working with an advisor and having a retirement income plan," Iqbal explained. "In an environment with greater emphasis on client-interest-first and transparency, advisors need to shift their focus to providing retirement planning activities, which will validate their product recommendations."
Financial advising is a "what have you done for me lately" type of industry. Clients want to see data that support certain assertions to be truly converted. These more recent findings regarding the benefits of working with you may be just what the doctor ordered to persuade doubting Thomases.