Individuals who seek financial planning advice are more likely to be confident in their financial future. Yet only 37% work with a financial advisor.
That’s one of the latest findings from Northwestern Mutual’s Planning & Progress Study, which also reveals that 66% of Americans believe their financial planning needs improvement, a four-percentage point increase since last year. This was especially true among Gen Z and Millennial workers—79% of whom said the same.
Economic uncertainty in 2022 may have prompted some to solicit advice from a professional, as just 18% said they have started working with a financial advisor or plan to work with one in the future.
“Financial uncertainty is up in 2023, and the question for many Americans is what to do about it,” said Tim Gerend, chief distribution officer at Northwestern Mutual, in a statement. “The good news is many are taking action to plan and tapping advisors for help in an increasingly complex financial environment so that they can reach their goals.”
Advice may boost financial confidence
According to Northwestern Mutual, those who work with an advisor have higher levels of confidence across multiple areas of financial wellness, including being prepared for unplanned expenses (at 31 percentage points higher), ability to retire (29 percentage points higher), and achieving long-term financial security (28 percentage points higher). They were also likelier to feel “very secure” in their retirement (72%) compared to those who do not (38%).
Individuals who work with an advisor were also likelier to say they’ve had a successful career (85% vs. 62%), have enough money for retirement (80% vs. 58%), achieve long-term financial security (75% vs. 47%), and believe Social Security will be available once they reach retirement (66% vs. 49%).
When asked why they turn to professionals for financial guidance, 48% said their advisor offers expertise they don’t have, another 48% said advisors help them keep a long-term view so they can achieve financial goals like a secure retirement, 44% said working with an advisor helps reduce financial anxiety, 43% said they keep them organized, disciplined, and on track, 31% believe they help align finances with values, and 31% said working with an advisor keeps them up to date on regulatory changes like tax codes.
Northwestern Mutual found Gen Z and Millennials were more likely than other generations to turn to an advisor for help aligning their finances with their values, saving time and keeping up to date on things like changes to the tax code.
Therefore, it’s not a surprise that 31% of individuals in Northwestern Mutual’s study listed financial advisors as their most trusted source of financial advice, outpacing spouses or partners (17%), family members (14%), business news (8%), friends (4%), online financial influencers and social media sites (3%), local news (2%), and trade associations (2%).
Millennials ranked financial advisors as their most trusted source (25%), while Gen Zers listed them as second (22%), following family members (28%).
When selecting an advisor to work with, respondents said they prioritize someone who understands their life stage priorities (54%) and who has a long track record of experience (51%).
However, Gen Z and Millennials, placed a higher premium on working with an advisor who is tech-forward and demographically similar to them.
“What we know is that people form long-term relationships with their advisors lasting 20, 30 or 40 years, and it’s clear that younger generations are expecting empathy just as much as they’re expecting financial expertise,” said Gerend. “For someone to feel comfortable sharing their dreams and worries with an advisor, there needs to be a human connection rooted in trust and understanding, and that’s something our industry should continue prioritizing.”
Northwestern Mutual’s Planning & Progress Study was conducted through the Harris Poll, and features 2,740 online interviews.
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