Enormous opportunity exists for advisers to help clients save and thrive.
The annual survey that measures Americans' confidence in their ability to afford a comfortable retirement is a bit of an oxymoron. Perhaps the survey, conducted by the nonpartisan Employee Benefits Research Institute and Matthew Greenwald & Associates for the past 23 years should be relabeled the “Retirement Lack-of-Confidence Survey.”
That's because the percentage of workers who are confident about having enough money for a comfortable retirement is essentially unchanged from the record lows found in 2011, according to the 2013 survey results, which were released today.
While more than half of the respondents expressed some level of confidence — 13% were very confident and 38% were somewhat confident they will be able to afford a comfortable retirement — 49% said they were not confident in their ability to live comfortably in retirement. Twenty-eight percent of workers surveyed said they are “not at all confident” in their future retirement prospects, the highest level ever recorded in this category in more than two decades.
Retiree confidence in having a financially secure retirement is also unchanged, with only 18% saying they were very confident, a record-low reading for that group, as well.
But within these numbers, there is a real opportunity for financial advisers to help Americans get back on the right track.
In need of a plan — and a planner
Most workers — 45% — merely guessed at how much money they will need to accumulate for retirement, rather than doing a systematic needs calculation. Only 18% said they had consulted a financial adviser to help them with the estimate and another 18% tackled their own calculations.
Even fewer respondents followed the professional advice they sought. Of the 23% of workers and 28% of retirees who reported that they have obtained investment advice from a professional financial adviser who was paid through fees or commissions, only 27% followed all of the advice, while most disregarded some or all of it.
The main reasons for disregarding the advice: not trusting the advice; not being able to afford it; having their own ideas, or other plans or goals; circumstances changing so the advice was no longer applicable; and getting better advice somewhere else.
But all is not lost. Americans who do not yet work with a financial adviser indicate that they may do so as they get closer to retirement.
Half of workers who have saved for retirement said if they consult a financial adviser in the future, it will be very important for the adviser to specialize in converting assets into retirement income. Another 31% indicated it would be somewhat important for an adviser to be a retirement income specialist.
Workers are also looking to financial services firms that manage their employer-based retirement plans for guidance. (See “The next frontier: 401(k) plans present a wealth of opportunities for advisers,” March 4, 2013).
About half of plan participants said that having the financial services company that handles their retirement plan give them recommendations as to how much to withdraw from their plan each month to help savings and investments last throughout retirement would be very valuable.
While the overall results of the 2013 Retirement Confidence Survey paint a bleak picture — just 2% of workers and 4% of retirees identify savings or planning for retirement as the most pressing financial issue facing most Americans today — it's not so bad when you narrow the scope to those who are most likely to be saving for retirement. Worker confidence tends to increase with household income, education, marital status and access to a retirement plan at work.
“Financial advisers have a significant opportunity not just to pick investments but to help people prepare a retirement savings plan that focuses on long-term success,” said Greg Burrows, senior vice president of The Principal, a long-time underwriter of the Retirement Confidence Survey.
“Advisers could also serve as strong advocates for plan design, helping employers adopt better plans” he said, such as automatic enrollment at appropriate deferral levels, paired with automatic annual increases.
Workers and employers would likely welcome their input.
According to the survey, among those not participating in a retirement plan, 88% of those said that they would continue to contribute if they were automatically enrolled at the standard 3% deferral rate, and 83% said that they would continue to contribute if the initial deferral rate was doubled to 6%.
