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Survey: Americans trust family, friends more than advisers

During times of stress, few people turn to financial professionals for help

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By Jed Horowitz

March 29, 2009 6:01 am ET

During times of personal crisis such as job loss, divorce or death of a spouse, the vast majority of Americans turn to family and friends rather than financial advisers for financial advice, according to a recent survey from AARP Financial, a taxable unit of AARP, the powerful Washington-based lobbying group.

That may be understandable, but it can have serious consequences because life crises often trigger significant financial decisions that can't be addressed by well-intentioned but not necessarily well-informed family and friends, the group said.

"They are certainly a great support system, but people aren't going to a resource that can probably empower them to make the best decisions," said Karen Keene, manager of research for AARP Financial, which is based in Tewksbury, Mass.

Almost half the survey's 1,200 respondents said that they had a relationship with an adviser, but just 26% of those who suffered a long-term job loss contacted an adviser or a financial services company representative for help in understanding and managing the financial implications of their situation.

By contrast, 60% consulted family members, and 40% went to a friend or colleague.

Indeed, more jobless respondents — defined as people, or their spouses or life partners, who have been unemployed for six months or more — went to the Internet for help than to either a professional adviser or representative of a financial services firm, the survey found.

Just 5% of the survey's 1,200 respondents cited a professional adviser as their most useful source of financial information during a long-term job loss or divorce, compared with a little more than 50% who found immediate family and friends most helpful. About 13% of people dealing with the death of a spouse or life partner — which arguably triggers pressing planning decisions — said that professionals offered the most useful guidance, though three times as many cited family members as most useful for financial advice.

"The extent to which people are taking action based on just family advice was the most surprising finding," said Richard "Mac" Hisey, president of AARP Financial.

The lesson for financial planners and advisers, he said, is that they need to consider clients' emotional needs before dispensing practical advice.

"They have to listen first" and could even consider setting up a referral network of psychological counselors, Mr. Hisey said.

The good news for advisers is that 37% of respondents said that they would consult an adviser if they could reach out to just one source for financial guidance during a crisis.

That bests the 34% who would go to their immediate family, the 11% who would turn to a friend or colleague and the 6% who would seek out a representative of a financial services company by phone or in person.

Just 2% of respondents said they would most trust the Internet, and just 1% said they would trust their employer.

Of the 14% of respondents who did contact financial advisers or firm representatives during various crises, 90% described the experience as very or somewhat positive, and 88% said the adviser didn't try to sell them anything.

The most common financial action taken by respondents suffering personal crises was to reduce expenses.

The survey was planned and conducted last fall before the brunt of the economic and market crises was known, said AARP Financial executives, noting that the economy itself has turned into a personal crisis for individuals and professionals.

"Advisers and planners have to take it up a notch," as painful as it may be to contact clients who may be angry about the performance of their retirement and other portfolios, Mr. Hisey said, noting that he has heard from some people whose advisers weren't answering their phones. "A lot of people are undoubtedly feeling they are not well-served, but this is even more of a reason to reach out," he said.

Those who do may find some useful talking points in some other survey findings.

A full 42% of respondents who went through a long-term job loss said that they had no time to prepare financially for the event, and 26% said they had less than one month. After they lost their jobs, 44% of respondents said that they were angry at themselves for not being better-prepared for their financial situation, and 66% were fearful about their future.

However, 89% of survey participants said that they considered themselves adept at handling their financial affairs on their own, while 46% said that they hadn't done any financial planning, even though they thought it was "a good idea."

E-mail Jed Horowitz at jhorowitz@investmentnews.com.

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