Study Finds 20% of Do It Yourself Investors Continue to Rely on Financial Professionals - InsuranceNewsNet

Study Finds 20% of Do It Yourself Investors Continue to Rely on Financial Professionals – InsuranceNewsNet


While an increasing number of Americans rely on multiple sources of information and advice to make investment decisions, 20% of households cite some type of financial professional as their primary source, according to a recent survey by Hearts & Wallets.

Many investors might say they want to manage their money themselves, but their stated preference doesn’t always match their behavior, explained Laura Varas, CEO and founder of Hearts & Wallets, an independent benchmarking research and measurement firm that studies the financial services industry. .

“The 10-year trend of investable assets shows that consumers of all asset groups – except for $2 million – want more involvement in investment decisions than in the past,” she said, adding, “But that doesn’t necessarily mean they want to go it alone. Only 50% of families who say their preference is to “make decisions and manage money on my own” consider themselves to have “the greatest influence on [their] decisions.’ “

“Financial professionals provide expertise that investors may not find elsewhere among other sources of information and advice.”
– Laura Varas, CEO and founder of Hearts & Wallets

Faras said an increasing number of Americans are relying on multiple sources of information and advice to make investment decisions. Forty-three percent of households use 7 or more sources to at least some degree today, triple the 14% of households who used these many sources in 2010.

“Financial professionals provide expertise that investors may not find elsewhere among other sources of information and advice,” she added.

Varas added that financial professionals are probably the source with the “most influence on” household decisions, with 20% of households citing some type of financial professional as their main source. She explained that the primary source is “the one who has the greatest influence on decisions.”

Investors use multiple sources because they realize that there is a wealth of information and tips to help them with investments, especially with the explosion of online platforms.

Our qualitative research tells us that investors often use multiple sources to “check” their primary or habitual sources. Individuals may consider their financial professionals to be the source they turn to for advice, but they also want to confirm this advice with other sources — from the Internet, friends and family to workplace programs,” Varas said.

Varas said that millennials with between $100,000 and less than $1 million and more than $1 million are the generational affluence groups that are most likely to rely on a large number (more than 7) from sources, at least to some extent. Baby boomers are unlikely to rely on a fairly large number of sources, and this low use of sources may be associated with their greater reliance on a counselor, when they have one. Boomers may have already tried a number of sources and found the source or sources that work for them.

Generations’ preferences

The baby boomers are also the most likely to rely primarily on paid financial professionals, Varas said. Fifteen percent of baby boomers said they relied primarily on financial professionals in 2021, compared to 7 percent of millennials and 11 percent of Generation Xers. “Millennials and GM’s use of paid investment professionals is at its highest since Hearts & Portfolio tracking began in 2010, but as a ‘regular’ source rather than the ‘primary’ source,” Varas said.

Varas explained that baby boomers tend to be more traditional in their approach to financial services and tend to use either full-service or no-service-type models.

Younger investors tend to experiment with a lot of different service models, including robo-advisors and other new models. In 2021, 38% of households with more than $2 million said they primarily relied on paid financial professionals, while 30% did so in an asset range of between $500,000 and less than $2 million, she said.

Faras said families with more money have the ability to pay more for services in financial advisory. This is part of the reason why wealthier families rely on financial professionals. “The positive thing is to see an increase in the number of families with low assets,” she said.

The family is the primary source of investing information and advice for one in seven families of generation Z and millennials, but rarely for older families, according to the survey. Two out of three Generation X and Millennial families rely on employer-sponsored programs at least to some extent, compared to just one in three Baby Boomers. By generation and wealth, the $100,000-plus baby boomers and the wealthier Generation X are the only groups with a significant number of families that prefer to rely primarily on financial professionals. Even among these groups, this preference occurs in only about a third of families.

Tips for working with clients

Faras offers some suggestions for financial professionals working with consumers in this investment climate:

  • Ensure that customer segmentations include investor attitudes and behaviour.
  • Building offerings that include support from financial professionals while allowing clients to do some of the work themselves.
  • Ensure that the new “hybrid” models are economically viable by determining reaction frequency and new pricing mechanisms.
  • Identify other influences on client decisions to illustrate how distinct your capabilities are from other consumer sources of investment information and advice, which may not even be direct competitors.
  • Invest in online tools and resources.
  • Be open and honest about fees and compensation because younger investors are very smart.

The survey report was drawn from the Investor Hearts and Portfolios Quantitative Database section, which analyzes how investors make investment decisions and their reliance on sources of information and advice. The last survey wave sent in September 2021 had 5,794 respondents.

Ayo Mseka has over 30 years of experience reporting on the financial services industry. Previously, she served as Editor-in-Chief of NAIFA’s Advisor Today. Call her at [email protected].

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