Why people are reluctant to hire an advisor

I have been co-hosting a radio program and podcast on financial topics for 28 years. Over that span, we have answered thousands of questions from callers around the country. And the one thing that continues to amaze me is how many people avoid our profession like the plague.

We took a call a couple of weeks ago from a 60-something woman who had several million dollars in an individual retirement account, a half million in a brokerage account, a pension and Social Security.

She wanted our opinion on her withdrawal strategy.

Because her main goal was to avoid paying higher Medicare premiums, she had only been spending down her brokerage account, and innocently ignoring the tax time bomb of future required minimum distributions from her IRA.

We receive a call like this practically every show: Someone who has done an impressive job saving and accumulating wealth, but never hires a financial adviser.

I've heard that roughly 80% of baby boomers who can afford to hire a financial adviser actually do, but what about the other 20%? What’s keeping them from engaging?

Studies have shown that most people will holistically benefit from the assistance of an advisor, realizing a 4%-plus increase in their yearly return (over and above going it alone), even after fees. (And that doesn’t even take into account qualitative benefits such as stress reduction.)

With that in mind, here are a few of the main reasons people avoid advisers.

First, the reputation of our industry stinks. While most advisers may be ethical, our industry is filled with conflicts and some folks simply don't trust anyone who calls themselves a financial adviser.

Another reason is that they’ve had a poor experience in the past. They were sold some lousy equity indexed annuity or given the cold shoulder when they didn’t have much in the way of savings.

Lastly, lots of folks just do not see or realize the value. They’ve heard that we charge 1% a year to manage money and they don’t see how anyone can be worth tens of thousands in fees.

Personally, this industry has been good to me, and I feel obligated to convince those people who could benefit from sound advice to seek a credentialed adviser. Helping people is a big reason we have hosted a financial topic program for almost three decades, and while certainly it’s been advantageous to the firm, frankly, I'm at a place now where the opportunity to help people via the podcast is one of the main reasons that I have no plans to retire.

I love what I do and I’m proud of the people I’ve helped. If you believe in the value of your profession, during the next review you have with an existing client, share a story about how your guidance changed a person’s life for the better. Remind them that they have friends and family members in a similar circumstance and that you would appreciate the opportunity to meet them so they too can see how much they could benefit from what we do.

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with approximately $16 billion in AUM.