Majority of Workers Still Worried About Funding their Senior Years

Retirement Planning Trust: A Financial Advisor Reality Check

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We’re headed in the right direction, but there’s still a long way to go. More consumers feel secure in their retirement planning efforts than they did in 2012, but the majority (55 percent) still do not feel financially set for their senior years despite improved economic conditions.

According to a Deloitte Center for Financial Services survey released on May 4, 45 percent of respondents feel “very secure” in having enough savings and income to maintain a comfortable retirement lifestyle, a sizable jump from the 28 percent in Deloitte’s initial survey in 2012.

The report’s authors say this positive increase could be a direct result of strong recent growth in investment returns, and are concerned this sentiment could be “fleeting.” This could be reversed by a downward shift in the economy or rising interest rates, which could influence stock market volatility.

“Despite a booming stock market and the financial crisis now more of a distant memory, what we hear from most consumers is they are simply not being effectively engaged by financial institutions and their representatives, including a significant segment of those with substantial assets to invest,” said Dan Rosshirt, a principal with Deloitte Consulting LLP. “Financial services firms should take the initiative in a bigger and bolder way, reestablishing their credibility as a provider of solutions rather than primarily product sellers.”

An opportunity presents itself as retirement planning comes back in the spotlight, with President Barack Obama advocating in February for greater fiduciary responsibility among advisors to put their clients’ best interests ahead of their own when offering retirement advice. Even more importantly, the Department of Labor released a re-proposed rule in this area last month.

The survey finds that the industry’s reputation has room for improvement: Fewer than one-third (29 percent) of consumers in the current survey felt that financial institutions in general were highly trustworthy, while only one-third of respondents felt that way about financial professionals overall.

But that response was different when it came to assessing their own financial advisor, with 78 percent of respondents saying that they trusted them, compared to 68 percent in 2012.

Consumers’ sentiments matched the perception of financial professionals themselves: Almost three-quarters (74 percent) of surveyed financial advisors felt the level of trust with their own clients has gone up. Likewise, more than 4 in 5 (82 percent) of advisors also believed that their clients have a great deal of trust in them to “act in their best interests.”

However, there are significant trust issues to overcome. For example, only about half (52 percent) of the advisors surveyed feel that their clients trust the products they offer to help meet their retirement goals. The report notes that, “perhaps this has to do with advisors’ lack of familiarity with these products or the tools they are given to educate clients about them. In either case, this is certainly one area for financial institutions to further explore opportunities to make sure their products truly serve consumers’ retirement goals and are relatively easy for average consumers and financial advisors to understand.”

In the words of one financial advisor, “Trust has gone up, but so has the market. We have a long way to go in the transparency department.”

“If the financial industry wants better results for clients, they should make retirement advice and planning a top priority and deliver planning offerings that are focused on the needs and desired outcomes of the client,” said Sean Cunniff, senior manager with Deloitte Services LP, and investment management research leader for the Deloitte Center for Financial Services. “Advice and retirement planning programs can supplement the educational programs, build product awareness, help clients set their financial priorities, and provide a path to transition clients from ‘do-it-yourselfers’ to advice-seekers.”

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