Fiduciary rule fanfare is getting through to the masses, spurring conversations among consumers about what really constitutes credible advice.
Robo bigwig Betterment for Business found that along with a rise in the use of digital advice, financial advisors remain a trusted source of unbiased financial information.
However, less than half of respondents (42 percent) correctly identified the definition of a fiduciary; 20 percent of respondents believed that the terms “fiduciary” and “financial advisor” are synonymous, and 27 percent did not know what one was at all.
And a majority of respondents (53 percent) report receiving absolutely no advice on their retirement investments whatsoever.
For the 47 percent of consumers who do seek retirement advice, 65 percent utilize a financial advisor, the top source of advice among those consumers, the firm finds.
Employees want retirement advice on demand and through digital channels
The traditional timing, cadence and channel of delivering financial advice may be misaligned to employee preferences.
When asked how they would like to receive advice, respondents reported preferences for receiving advice as often as they have questions and through channels like email and 1:1 sessions.
Least preferred channels included mail and once a year, employer-sponsored information sessions.
Across generations, millennials expressed the most interest in an advice cadence of more than once a month.
Fiduciary awareness is slowly taking hold, but there is still room for improvement related to consumer action
Employees still trust their financial advisors, and many are not making any changes since the ruling has been publicly discussed.
Of those aware of the Department of Labor’s Fiduciary Rule, 84 percent have taken no action (such as asking their advisor if they are a fiduciary) based on their understanding of the ruling. However, of those who have acted, 48 percent found a new financial advisor.
Behavioral “nudges” are welcomed and effective in helping people save more for retirement
Nearly all of respondents in a 401k with auto-enrollment currently make contributions to their plan. In fact, for those who remained enrolled, 49 percent of respondents increased the contribution rate.
Millennial respondents were most likely to remain enrolled in the plan after auto-enrollment. Fully 78 percent of respondents that have access to an auto-escalation feature, which gradually increases plan contribution amounts over time, use it.
Millennials seem to like auto-escalation—but in practice, might not be using it most effectively, further underscoring the need for relevant, timely advice and education. Fully 41 percent say it helps them save more, but 13 percent say they elected to save a lower percentage now because they know the deferral rate will go up.