According to the Principal Financial Well-Being Index: Advisors, a nationwide study of 616 financial advisors conducted online by
Yet action is precisely what differentiates the financial winners from the losers, according to The Principal.
"Financial planning doesn't have to be so hard. The most effective advisors help clients envision their financial future," said
The Principal Financial Well-Being Index: Advisors surveyed financial advisors nationwide including independent broker/dealers, wire house and regional brokerage firms, insurance agencies, independent wealth management firms, banks and independent asset management firms. The Index is part of a series of quarterly studies examining the financial well-being of American workers and business owners, and advisor opinions and practice management.
Advisors say clients' top financial dreams are financial security in retirement (80 percent) and financial security in general (77 percent). Good health (56 percent), travel (42 percent) and living debt free (40 percent) round out the top five financial dreams.
Actions speak louder than words
But getting people to take action is a challenge. "Advisors help people overcome obstacles. They can very quickly turn inertia into opportunity by recommending concrete, simple steps to move forward," Minard said. Top action steps advisors recommend to clients are:
-Increase retirement savings (77 percent)
-Create a financial plan (73 percent)
-Pay down debt (53 percent)
-Spend less (32 percent)
-See an advisor regularly (22 percent)
-Save enough for an emergency fund (19 percent)
The study shows that on average, most advisors believe clients should save around 17 percent of their pay to have enough income during retirement. Though many of their clients have financial plans, rarely do clients start saving early enough to achieve their financial dreams, they said. In fact, over half of advisors (55 percent) say that no more than one in four of their clients actually begin saving early enough in their career to achieve the recommended level of retirement savings. Overspending and living beyond one's means (61 percent) are the most common reasons clients veer from their financial plans, the study shows.
Americans with advisors better prepared
According to a prior survey by The Principal1, people who work with a financial advisor simply fare better. Americans who work with advisors said:
-They were significantly more prepared for a comfortable retirement (61 percent) compared to workers who do not use an advisor (29 percent)
-They made solid progress toward their long-term financial goals (74 percent)
-They were more financially confident since they began working with an advisor (73 percent)
-They were extremely happy with their current financial well- being than employees who do not see a financial professional (54 percent compared to 29 percent)
Other key findings include:
-Clients' top financial blunders according to advisors are living beyond one's means (24 percent), not saving enough (15 percent), starting saving too late (9 percent), putting off a financial plan (9 percent), fear (9 percent) and inertia (9 percent). Other blunders included investing too little in retirement, too much debt, not budgeting and not investing.
-Sixty-five percent of advisors say clients most often stretch the truth about living within their means, followed by amount of debt they have (44 percent). Risky financial behaviors, level of disposable income, family problems, health issues and salary are other common areas where clients twist the facts.
-Advisor challenges: Fifty-one percent of financial professionals said dealing with regulatory and compliance issues is the single greatest pain point in their business, followed by economic uncertainty (39 percent) and market volatility (37 percent).
-Financial professionals ranked not having enough time in the day to get their work done, followed by increased regulatory burdens (28 percent and 21 percent, respectively) as the most common anxieties keeping them up at night.
-Overwhelmingly, the most common rewards as financial advisors are giving clients peace of mind (78 percent) and helping clients achieve their financial dreams (77 percent).
-Three in five advisors (59 percent) believe male and female clients are equally likely to follow financial recommendations, but a third (34 percent) believe female clients are more likely to do so.
The survey of advisors was conducted online by
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