Not all affluent investors use financial advisors, but the majority certainly do.
Spectrem research shows that between 69 and 84 percent of investors use a financial advisor for at least some of their investment decisions. The percentage range is based on net worth; the more an investor is worth, the more likely that person is to use a financial advisor.
However, in a confusing and confounding revelation from Spectrem research, investors approaching retirement do not always confer with their advisor about the financial decisions they need to make in order for their retirement to be successful.
The wide-ranging qualitative and quantitative research study Financial Wellness in Retirement discussed retirement decisions with investors who were at different stages of retirement, from those retired less than 10 years, those retired for 10 to 20 years and those who have been retired more than 20 years, all with at least $500,000 in net worth not including primary residence. From the entire group, only 53 percent used a financial advisor to plan for their retirement.
That is a stunning finding, and one that should make advisors re-consider just how hard they push to discuss retirement with their clients.
When investors explain why they don’t use advisors for any investment purposes, many say they do not believe they have enough in assets to warrant using an advisor, or they do not trust the advisor to have their best interests in mind. For investors approaching retirement, they may fear discussing their finances with a professional because they don’t want to face any bad news regarding their financial preparation.
Another surprising insight from the Spectrem study is that a significant percentage of retirees did not conduct specific retirement planning until a year before they left the work force. That is a fact that advisors can change by being forceful about bringing up the topic before it becomes an immediate consideration.
Finances in retirement can be complicated. Many investors have individual retirement accounts that provide disbursements, and investors need to know the best way to approach decisions related to that long-term investment.
Similarly, investors have a decision to make regarding Social Security benefits. Determining the best time to take disbursements from that account is key to the financial survival of many retirees, including those with a sizable net worth, and advisors should be able to provide knowledgeable advice regarding that decision.
However, investors approaching retirement are probably aware that there are shysters willing to take advantage of investors at a time when they can be unusually vulnerable. Retirees may be extremely caution about approaching professionals for assistance, even those who have a financial advisor with whom they worked through their income-producing years.
It is true that advising a client investor about retirement decisions is not a particularly lucrative function for advisors, since it is a process of money-shuffling and decision-making. But the Spectrem study shows that 70 percent of retirees who worked with an advisor on pre-retirement decisions worked with that same advisor throughout their retirement, and retirees still have multiple financial decisions to make for which advisors can be helpful.
Wealth transfer, current and eventual living arrangements and health issues are all events which can cause a retiree to look for professional assistance. If they worked with an advisor successfully to prepare for retirement, they are likely to turn to that same professional to help with the in-retirement financial decisions which come up.
Retirement does not end an advisor-investor relationship. Although retirees no longer have a paycheck to consider, they have all of those investments they made while working that are now the foundation of their income. Displaying a willingness to discuss retirement early can create a sense of teamwork between an investor and an advisor that can be beneficial for both parties down the line.