Overconfident, underinformed Americans prefer amateur advice

'Moments of truth' can overcome the reluctance of many consumers to approach a financial adviser.

Fear often drives potential clients to Carol Petrov, vice president and senior relationship manager at advisory firm Kendall Capital. Something good has happened — they finally saw their retirement savings click into seven figures, or they came into unexpected money — and “they know they don’t know what to do and they don’t want to screw it up,” she said.

Americans don’t know as much about investing as they think they do, according to fresh research, but that doesn’t keep them from playing adviser with friends and family. It’s all fun and games until actual money materializes and the stakes get real.

“We get a lot of do-it-yourselfers,” Petrov said. “Typically, a married couple has been saving all this time and they reach a moment — they have a million dollars, or they have to start withdrawing — and they realize they are not experts. They’ve had that humbling moment and need help.”

Results of a new survey conducted by international research firm YouGov about Americans’ attitudes toward investing found that 73% of men and 71% of women are confident about making financial decisions; even 64% of respondents under age 30 asserted their financial confidence. At the same time, 62% of the 1,000 Americans polled reported that they are very or somewhat anxious about their financial prospects.

For answers, they turn to each other; financial advisers are in a three-way tie with the internet and “no one” as the go-to source of financial information. Partner, parents, family and friends, totaling 74%, comprise the overwhelming source of information for perplexed consumers.

“The only time we see greater trust in advisers is when people are in extreme situations, such as [when they] are overwhelmed by debt, but when it comes to making financial decisions about the future, they trust people like themselves,” said Emma McInnes, global sector head of banking and finance with YouGov. “There’s a perception that financial advisers only work with people with more money than me, and that’s a disconnect.”

People who don’t have meaningful experiences with financial advisers don’t have any context for assuming that advisers are inaccessible, and they gravitate to people they trust to at least have their best interests at heart, McInnes said, perpetuating the avoidance cycle.

The industry’s high thresholds for accepting clients don’t help, “if consumers feel that they’re always below that threshold,” she added. Clients who accept only clients with, say, half a million dollars in investible assets might find that counterproductive when consumers who do reach that status see advisers’ outreach as predatory. “I’ve arrived, and now I’m at the mercy of another load of people who want my money,” said McInnes, air-quoting a wary consumer. After all, most people who achieve a hard-won financial goal celebrate with a car, trip or other bucket-list expenditure — not with a trek to a new adviser.

Advisers are faced with the challenge of “changing the narrative,” McInnes said.

Petrov couldn’t agree more. “They might think they’re an expert, but they don’t really know how to save systematically toward certain goals,” she said.

She avoids investment jargon, which confuses many people, rather than impressing them. Advisers who proactively explain their business models neutralize unspoken consumer apprehension, Petrov said, by dismantling assumptions about hidden fees. And advisers can turn the friends-and-family-first dynamic to their own advantage, she said, by equipping clients with the vernacular to make referrals. Give the family “experts” something to actually talk about, Petrov said, and they will.