In a recent Hearts & Wallets research report, Americans reported that their top five financial advice gaps are: emotionally managing market volatility, choosing appropriate investments, estimating required minimum withdrawals (RMDs), taking buy/sell decisions on investments and estate planning. .
In the report, Pain Points & Actions: Using the Biggest Advice Gaps to Jump Start Consumer Conversations, Hearts & Wallets defines an advice gap as an unmet need for advice on a specific task when a household finds a task difficult and does not didn’t ask for help.
Biggest Advice Gaps by Assets
In terms of assets, the biggest counseling gaps are estate planning, managing the finances of aging loved ones, and deciding whether or not to make Roth conversions, when households with $5 million and above are included. according to the report.
By life stage, Estimated Minimum Required Withdrawals (RMD) is the only unmet advice need that emerges as one of the top 5 advice gaps across all work “accumulating” life stages (21 to 64 years old). The main gap in advice for pre-retirees is to develop a strategy for withdrawing income from multiple accounts. Retirees and fully employed seniors have the lowest percentage of advice gaps of all life stages.
Interestingly, estate planning is an unmet advice need at all asset levels and most life stages, not just for older, wealthier households.
“The finding is somewhat surprising, as many would think this is primarily a priority for older, wealthier households,” noted Laura Varas, CEO and Founder of Hearts & Wallets. “Our research tells us that millennials are twice as likely as baby boomers to ask for help with multiple tasks. In 2021, 25% of millennials say they lack advice on estate planning, compared to 21% of Gen Xers, and baby boomers (which range from 16% for those who plan to continue working to 11% for those who already are). retirement).”
Young consumers looking for help
Millennials and Gen X consumers who have said COVID-19 has changed their attitude towards saving and investing are particularly likely to seek help with multiple tasks, including including estate planning, Varas added. “Written verbatims from our annual survey of 5,794 respondents indicate that for some of these COVID-altered people, the shock of seeing so many out of work underscored the importance of ‘preparing’.”
The pandemic has reinforced how life, work and financial circumstances can change in an instant, Varas said. Some expressed fears about the markets and the world being so uncertain. Some comments included observations that the pandemic has demonstrated that life is “fragile”, so it makes sense to take advantage of this today.
“That sense of fragility,” Varas added, “can make young couples think about estate planning, especially around who will care for their children if something were to happen to them, and potentially things like life insurance, though our research didn’t break that. Also, most younger households have less money, Varas said. The 1% of U.S. households that are older (55 74) and wealthy (over $5 million) control 32% of all retail investable assets in the United States.
According to the survey, more U.S. households reported seeking help with multiple financial tasks, with growth driven by households with $100,000 to less than $500,000 in assets. Nationally, 3 in 10 households requested help with tasks over 3 in 2021, a year-over-year increase of 4 percentage points and 8 percentage points since 2014.
Compared to older generations, Millennials and Gen Xers are more likely to seek help with multiple financial tasks, to seek help with tasks over 3 years old, and often up to 7 years old and more. Millennials are twice as likely as baby boomers to ask for help with multiple tasks. Millennials and Gen X consumers who have said COVID-19 has changed their attitude toward saving and investing are particularly likely to seek help with multiple tasks.
Not everyone is looking for help
Three in 10 US households said seven or more financial tasks are very difficult (ranked 8-10 on a 10-point scale). However, they did not ask for help with a single task.
This lack of action is puzzling, especially considering that three in 10 households reported finding seven or more financial tasks very difficult (ranked 8-10 on a 10-point scale), but did not ask for help. help with a single task, Varas pointed out.
“We think several factors could be at work,” she added. “Current financial language may not resonate, especially with younger consumers. Research we conducted in 2020 found that most Americans (81%) lack financial literacy, choosing the best answer for 4 or fewer of the 7 key investment screening terms that were presented to participants in a national survey of nearly 6,000 US households.
Price could also be a barrier, Varas added. Businesses should consider adjusting pricing to market size. For example, if the opportunity to help with a task is large in terms of households but not assets, businesses should use a subscription or fixed fee for all programs that focus on that task. If the need is greater in terms of assets, they should use traditional basis point pricing.
“We know that consumers who receive advice are twice as likely to see value in paying for advice,” Varas said. “So provide different ways for more consumers to have first-hand experiences with advice to help them understand how professional advice can make tough decisions easier. Educate consumers about the value of advice and the range of advice options. We believe one way to break through the inertia and clutter is to focus on helping with a task to start a conversation with the consumer.
The research report is based on the Hearts & Wallets Quantitative Investor Database with over 100 million data points on consumer buying habits from 65,000 US households. The latest survey wave was conducted in September 2021 and includes 5,794 participants.
Ayo Mseka has over 30 years of experience reporting on the financial services industry. She was previously editor of NAIFA’s Advisor Today magazine. Contact her at [email protected]