The latest research from Northwestern Mutual analyzes how wealthy Americans are investing and saving towards their retirement, finding that nearly half believe their planning could use some help.
According to the 2023 Planning & Progress Study, of U.S. adults with over $1 million in investable assets, 47% say their financial planning still needs improvement, and 33% think it’s possible they could outlive their savings.
Still, 84% of high-net-worth individuals also said they had a long-term financial plan that factors for up and down economic cycles, compared to the 52% who said the same among the general population. Forty-two percent of wealthier Americans identified themselves as highly disciplined planners, while only 20% of the general population thought similarly of themselves.
Thirty-five percent of high-net-worth individuals said they were disciplined planners but said their plans could deviate if they didn’t stay on top of them. Another 20% believed themselves to be informal planners, and a mere 3% said they have not planned for their long-term future, nor have they established any goals.
“[Wealthy people] aim to see well beyond today. That includes the possibility of twists and turns in their financial lives,” said Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual, in a statement.
For comparison, 30% of the general population saw themselves as disciplined planners who may get side-tracked with their plans at times, while 36% called themselves informal planners. Fifteen percent of the general population said they haven’t planned for their retirement.
Wealthier Americans likelier to work with advisors
One reason for such a disparity among wealthier individuals and the general population could be the fact that 70% of the former work with a financial advisor, nearly double the amount of the latter, Northwestern Mutual found.
This is likely due to the fact that wealthier individuals have greater access to financial advice and financial planning resources, or the fact that many financial advisors still choose to only work with individuals with more money. As a result, close to half of Americans continue to believe that financial advisors are only for the wealthy.
Among high-net-worth individuals, 53% said they trust their financial advisor the most for advice, compared to 31% of the general population. Wealthier Americans also trusted their spouses and partners for advice (11%), business news (10%), family members (6%), online financial influencers and social media sites (4%), trade associations (3%), friends (2%), and local news (2%). Eight percent said they had not received financial advice from anyone.
As investors face periods of economic uncertainty marked by inflation, more high-net-worth individuals are evaluating whether their advisors can meet all of their financial needs.
When asked which factor would be most important if they were to change their financial advisor, 48% said they would look for comprehensive financial guidance that focused on investments, retirement planning, insurance, etc. Thirty-four percent would want a better understanding of their life stage and priorities, 30% want new ideas and a more modern approach from their advisor, 29% want to work with a professional who is closely aligned with their values, and 22% would want to receive guidance from an advisor who has a better understanding of their demographic.
“Periods of uncertainty like the one we’re in now are spurring people to take inventory about the choices they’ve made and reconsider if their advisors are the right fit for them,” added Javeri Gokhale. “As more affluent Americans intentionally seek out comprehensive financial advice instead of individual financial products, I expect to see this trend of second-opinion-seekers to grow.”
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