Quarter of investors have no financial plan and don't expect to have one

Some are surprised by numbers but others see progress

Oct 8, 2013 @ 3:35 pm

By Megan Durisin

A quarter of potential investors have no financial plan and close to 40% of that group doesn't anticipate building one. One common reason: apathy.

“Our advice for individuals is to seek help and to really think about … not only their investment, but their financial future,” said Mike Spangler, president of Nationwide Funds, which surveyed 783 potential investors with a minimum of $100,000 in investible assets.

“The numbers were jarring for us,” he said.

But the numbers didn't surprise Melissa Joy, director of investments at the Center for Financial Planning Inc., who said she has seen the dialogue around financial planning strengthen in the last few decades.

“If anything, I would think that the number might have been higher,” Ms. Joy said of people who don't have a financial strategy. “Financial planning isn't a new concept today like it was 20 years ago. I'm happy to hear that so many people do have a financial plan in place.”

Mr. Spangler said part of the disparity in financial planning stems from the Generation Y and Generation X groups. Many of them haven't consulted a professional, possibly because they feel retirement is a far- off prospect, or because they gather most of their financial advice through other means, he said.

More than a third of all respondents said they aren't working with a financial adviser, for reasons including not wanting to pay the associated fees or feeling confident that they can do the planning on their own. Mr. Spangler said speaking to a financial planner in person is often more helpful than gathering information solely from financial planning blogs or other web sources.

“It's hard to reach a destination that you haven't charted a map to,” he said. “Find an adviser that is really looking into your concerns and meeting you on your terms.”

One bright spot is the fact that the savings rate of investors has increased in the post-financial-crisis years, Mr. Spangler said. More Americans are concerned about paying for health care costs, retirement readiness and saving for their children's education, he said. Still, shocks in stocks can cause people to become anxious when it comes to savings, he said.

“We definitely see the market volatility here domestically, as well as geopolitical volatility, as really freezing and creating inertia” among investors, Mr. Spangler said.

Ms. Joy agreed, saying events such as the government shutdown and the debt ceiling debate can make people “frozen in their tracks” when it comes to saving, which she calls a duck-and-cover strategy. On the opposite side, when the markets are too rosy, investors become complacent, she said.

“Maybe in the next six to 12 months, when they feel there's not a crisis, they'll come out of the woodwork and have some momentum for making some changes,” Ms. Joy said.

Regardless of these external shocks, the impetus to develop a financial plan is usually triggered by a life event, whether it's preparing for retirement or helping to support a parent.

“Some people can be very confident and capable in planning for their finances,” Ms. Joy said. “Other people may have the capabilities, but don't have the time or have devoted a lot of their time to becoming an expert in pursuing their own passions or career. They might want to delegate.”

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