20% of do-it-yourself investors still rely on finance professionals, study finds – InsuranceNewsNet


While a growing number of Americans rely on multiple sources of information and advice to make investment decisions, 20% of households cite some kind of financial professional as their main source, according to a recent survey. from Hearts & Wallets.

Many investors may say they want to manage their money on their own, but their stated preference doesn’t always match their behavior, explained Laura Varas, CEO and founder of Hearts & Wallets, an independent research and insights firm. benchmarking that studies the financial services industry. .

“The 10-year trend of investable assets shows that consumers in all asset groups – except $2 million and above – want to be more involved in investment decisions than in the past,” she said, adding, “But that doesn’t necessarily mean they want to go it alone. Only 50% of households who say they prefer to ‘make decisions and manage their money on their own’ consider that they have “the greatest influence on [their] the decisions.’ ”

“Finance professionals offer expertise that investors may not find elsewhere among other sources of information and advice.”
— Laura Varas, CEO and Founder of Hearts & Wallets

A growing number of Americans rely on multiple sources of information and advice to make investment decisions, Varas said. Forty-three percent of households use 7 or more sources to some extent today, triple the 14% of households that used as many sources in 2010.

“Finance professionals offer expertise that investors may not find elsewhere among other sources of information and advice,” she added.

Financial professionals are most likely to be the source with “greatest influence on” household decisions, with 20% of households citing some type of financial professional as their primary source, Varas added. A primary source, she explained, is the one “who has the most influence on decisions”.

Investors are using multiple sources as they recognize there is a wealth of information and advice out there to help them with their investments, especially with the explosion of online platforms.

“Our qualitative research tells us that investors often use multiple sources to ‘verify’ their primary or usual sources. Individuals may look to their finance professionals as their source of advice, but they also want to confirm that advice with other sources – from online programs, friends and family, to workplace programs,” Varas said. .

Millennials with $100,000 to less than $1 million and $1 million and above are the generational wealth groups most likely to rely on a high number (over 7) of sources, at least to some extent measure, Varas said. Baby boomers are much less likely to rely on a large number of sources to some extent, and this lower use of sources may be related to their greater reliance on an advisor, when they do. have a. Baby boomers may have already tried a number of sources and found the one or ones that work for them.

Generational preferences

Baby boomers are also the most likely to rely primarily on paid finance professionals, Varas said. Fifteen percent of baby boomers said they rely primarily on financial professionals in 2021, compared to 7% of millennials and 11% of Gen Xers. Millennials and Gen X is at its highest since tracking Hearts & Wallets began in 2010, but as a ‘regular’ source instead of the ‘main’ source,” Varas said.

Baby boomers tend to be more traditional in their approach to financial services and tend to use full-service or no-service type models, Varas explained.

Young investors tend to experiment with many different service models, including robo-advisors and other new models. In 2021, she said, 38% of households over $2 million said they relied primarily on paid finance professionals, while 30% did so in the asset range. from $500,000 to less than $2 million.

Households with more money have the ability to pay for more financial counseling services, Varas said. This is therefore partly the reason why the wealthiest households are more dependent on financial professionals. “What is positive is to see the increase in the number of low-income households,” she said.

Family is the primary source of investment information and advice for one in seven Gen Z and Millennial households, but rarely for older households, the survey found. Two in three Gen X and Gen Y households depend at least to some degree on employer-sponsored programs, compared to just one in three baby boomer households. By generation and wealth, baby boomers with over $100,000 and the wealthiest Gen Xers are the only groups with a significant number of households whose preference is to rely primarily on financial professionals. Even among these groups, this preference only occurs in about a third of households.

Tips for working with clients

Varas has a few suggestions for finance professionals to work with consumers in this investment climate:

  • Make sure that customer segmentations include both investor attitudes and behaviors.
  • Create offers that include support from finance professionals while allowing customers to do some work on their own.
  • Ensure the economic viability of new “hybrid” models by defining the frequency of interactions and new pricing mechanisms.
  • Identify other influences on client decisions to clarify how your capabilities differ from other sources of consumer investment information and advice, which may not even be direct competitors.
  • Invest in online tools and resources.
  • Be open and honest about fees and compensation, as young investors are very savvy.

The survey report was taken from the Hearts & Wallets Quantitative Investor Database section, which analyzes how investors make their investment decisions and their dependence on sources of information and tips. The latest survey wave conducted in September 2021 includes 5,794 participants.

Ayo Mseka has over 30 years of experience reporting on the financial services industry. She was previously editor of NAIFA’s Advisor Today magazine. Contact her at [email protected].

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