Retirees and pre-retirees remain skeptical about the likelihood of recovering their portfolio losses, and they are keeping financial advisers at arms' length, according to an informal survey.
Retirees and pre-retirees remain skeptical about the likelihood of recovering their portfolio losses, and they are keeping financial advisers at arms' length, according to an informal survey.
As part of a panel presentation at the Insured Retirement Institute's annual conference in Boston on Monday afternoon, titled “It's Not What You Say, It's What They Hear: How to Talk to Consumers in a Post-Crisis World,” Michael Maslansky, chief executive of Luntz Maslansky Strategic Research, selected 24 retirees and pre-retirees with at least $100,000 in assets to participate in an informal study and share their experiences in light of the market's decline last year.
The investors on the panel were identified only by their first names and answered questions about how their attitudes changed following the market decline.
The panelists' losses left them feeling vulnerable and suspicious of the financial services industry.
“I'm not poor, but I think of my self as being poor. I'm cash poor,” said one panelist, Brian.
“If I had some assets, it would be insane to sell them now and get some liquidity,” he said, adding that he has “cut advisers off completely.”
Others reported that they didn't hear much from their advisers amid the thick of the crisis. Another investor, Carol, lamented that she used to hear from her adviser all the time, but now she calls him every few months and she doesn't have the same level of confidence in him that she used to.
“The adviser's motivation is different from mine. I know who I'm looking out for; I don't know who they're looking out for,” said another investor, Fred.
“We need more transparency. Advisers who want to talk to me have to tell me what's in it for them and what's in it for me,” he said.
However, not all the panelists had a less-than-reassuring experience with their adviser during the crisis.
Anne, a retiree, said that her adviser kept in touch and adjusted her portfolio to a conservative setting.
“He's very trustworthy, and he communicates every step of the way,” she said. “From what I hear from the rest of the group here, that's not always the case; I didn't realize how fortunate I was until today.”
The participants also reflected on their loss of trust in financial institutions.
“The question is, will the company still be around 30 years from now when I need them?” asked an investor named Vijay.
“Lehman Brothers [Holdings Inc.] went bankrupt,” he said. “Look at all the companies that had to be bailed out.”
Toward the end of the session, panelists were asked to demonstrate by a show of hands whether they prefer to work with advisers who are paid by commission, those who work on an hourly rate, those who are paid a fixed flat fee or those who charge by a percentage of assets under management. A majority indicated that they prefer paying a fixed flat rate for advice, and none of the panelists indicated that they find commission-based advice appealing.
“I've tried a bunch of different models with advisers. I have someone that's independent who I pay by the hour,” said a panelist named David.
“Part of the reason is when I work with companies like Fidelity [Investments], I'm not always clear on whether they're trying to sell me something or are they giving me advice,” he said. “Transparency goes toward ameliorating that.”
