It’s hardly a secret—many Americans lack access to financial planners and wealth managers due to lower assets and net worth. Many participants nearing retirement, in particular, would benefit from working with a financial advisor to help them navigate the complexities of retirement planning.
“Close to one-third of retirement investors with less than $250,000 indicate they do not have enough assets to justify an advisor.”
Yet Cerulli Associates finds the use of professional financial advice is positively correlated with household investable assets. More than half of participants with $500,000 or greater in investable assets rely on a professional for retirement advice, compared with about one-in-five (21%) with household assets of less than $100,000.
Further, retirees with less than $100,000 in investable assets are more likely to have no source of financial advice, according to the Boston-based firm. In sum, less than one-third (31%) of retirees indicate a financial professional is their primary source of retirement advice.
Close to one-third of retirement investors with less than $250,000 in household investable assets indicate they do not have enough investable assets to justify using an advisor—an issue many wealth managers are addressing with the incorporation of digital advice offerings.
“Services like retirement planning and decumulation become easier to scale across client accounts—regardless of minimums—with digital platforms,” Shawn O’Brien, Cerulli associate director, said in a statement. “Some defined contribution managed account providers have implemented ‘hybrid’ advice platforms, which sit between traditional planning and advice and purely digital (robo) advice to capture investors when they are ready for more customized investing and financial planning.”
Fee failure
Fees are another blocking issue for participants. Nearly all (93%) view competitive pricing as at least somewhat important, and the perception that professional advice is not worth the cost is a leading reason why participants eschew a financial advisor.
However, particularly for wealthier investors nearing retirement, Cerulli suggests the value of working with a dedicated financial advisor or private wealth manager cannot be understated and, in many cases, is worth the asset-based fees.
Ultimately, providers offering financial planning and wealth management services should inform participants of the benefits of working with a dedicated financial advisor.
“While purely digital advice solutions tend to be lower cost and more easily accessible, many retirement investors prefer the comfort of working with a human advisor when making significant, consequential financial decisions,” O’Brien concluded. “Human advisors are arguably better equipped to address the behavioral finance side of investing than are purely digital solutions.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
