Tools for Financial Security

1/1/2022

In most households there is a toolbox somewhere that has basic tools needed for various household projects.  A hammer, screwdriver, and tape measure are just a few of those “essential” items to include in a household toolbox. What about a financial toolbox? What tools should be used by investors to help them with their financial security?

An emergency cash fund is a good place to start, with 87 percent of wealthy investors indicating that an emergency cash fund makes them feel at least somewhat financially secure, according to recent research from Spectrem Group about Financial Wellness. A financial plan is also a great tool for financial security, with 78 percent of wealthy investors feeling that way. A will and an estate plan provide for financial security in knowing that end of life plans and distribution of assets will happen according to an investor’s wishes.  

Life insurance also addresses those end-of-life financial security concerns, so it is not surprising that 63 percent of wealthy investors feel financially secure through having the tool of life insurance purchased outside of their work policies, and 56 percent feel financially secure from the life insurance policies they have through their work. Long-term care insurance is also a tool in feeling financially secure according to 61 percent of wealthy investors.

Who is helping these wealthy investors with their financial security and wellness? Ninety percent of wealthy investors feel that their advisor is effective in helping them ensure their financial wellness. Investors feel they are effective because the advisor’s focus is to help the investor with their overall financial wellness. Nearly a quarter of investors feel that an advisor is effective at ensuring financial wellness because they offer reasonable suggestions that can improve financial wellness. Investors need to be receptive to listening to their advisor and considering implementing suggestions and ideas the advisor has to help advance financial wellness efforts.

Eighty-six percent of wealthy investors feel their retirement provider is effective in helping them ensure their financial wellness. A retirement plan provider may be the first experience many investors have with investing or planning, so it is not surprising that this relationship is viewed by investors as one that helps ensure their financial wellness. While their retirement provider has often come from their workplace, the opinion of the effectiveness of their employer in helping ensure financial wellness is not as favorable, with only half of wealthy investors feeling their employer is effective in helping them ensure their financial wellness.

Investors also count on themselves quite a bit for financial wellness, with nearly three-quarters of investors identifying their own personal research as being effective in helping ensure their financial wellness. The input of family and friends is not nearly as significant, as only 27 percent of wealthy investors feel that friends and family are effective in ensuring financial wellness. 

 The tools in the toolbox for financial wellness are equally as important as the people helping to ensure those tools are utilized properly. Knowing how to leverage and utilize experts in their field is just as important a tool as being able to do something on your own. While an investor may be familiar with the concepts of circuitry, they may not want to rewire their entire home’s electrical. The same holds true with one’s financial situation. An investor may know quite a bit about how to ensure financial wellness but they are wise to leverage the experts of their advisor and their retirement provider to ensure things are done properly.