A new study on attitudes about wealth, finances, legacy planning, and working with a financial planner has found that most Americans who work with a financial planner are less stressed than those who don’t.
The study was conducted on behalf of Edelman Financial Engines, one of the largest RIAs. About half of the 2,000 people surveyed hold household assets ranging from $500,000 to $3 Million (defined as “affluent” in the study) and were between the ages of 45 to 70.
“For many people, worries about money can override basic facts, which can often lead to confusion and frustration,” says Jason Van de Loo, head of wealth planning and marketing at Edelman Financial Engines. “We went deep to uncover the beliefs and behaviors around the concept of wealth, and to use those insights to inform the support and action we provide, especially for those who have worked hard and may be doing many of the right things financially, [but who] still feel like it’s not quite enough.”
More than half (52 percent) of those surveyed who did not work with a financial professional reported feeling stressed within the past six months. Comparatively, only 39 percent of those working with a financial professional said the same thing. Additionally, 83 percent of those who worked with a financial professional said that they’re less stressed because of the help they receive from them. About 75 percent of those surveyed said that money issues are a source of stress, and among those, the economy (56 percent) and personal finance (43 percent) are stress inducing.
And yet, of those surveyed, only 35 percent work with a financial professional, which leaves a broad swath of the American public underserved by advisors.
The top three barriers to working with a financial professional that were cited by respondents are the perceived cost of advice (38 percent), not having enough money (33 percent), and finances being simple (27 percent). For the affluent who do not currently work with a financial professional, perceived cost of advice was an even larger barrier (44 percent). Other roadblocks for the affluent were the enjoyment they get from doing it themselves (38 percent), a lack of trust (28 percent), and the belief that they could find the needed info elsewhere (27 percent).
Over the years, wealth management has seen a rise in flat-fee or advice-only financial planning offerings, instead of fees determined as a percentage of AUM. Firms that charge AUM-based fees also typically require that a minimum level of assets be held in taxable accounts. A 2021 J.D. Power survey showed that 74 percent of millennials would prefer to pay for full-service wealth management via a one-time, fee-for-service model.
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David Barfield, the founder of Datapoint Financial Planning, an Atlanta-based flat-fee-only RIA, says that when he first started as an advisor, he worked for a firm that charged a percentage of assets. “My whole adult life, all I could find was someone who wanted to manage my assets for 1 percent, and there was just no way on earth I was going to pay someone that kind of money when what I wanted was financial planning,” Barfield says. “It was just not a model that I agreed with — nor do a lot of other people.”
Barfield now charges an upfront planning fee, as well as a subscription fee based on household income. He believes that everyone can benefit from financial planning and financial advice, but he’s not surprised that perceived cost and not having enough money were the top two barriers, given the historically high cost of financial planning.
According to survey respondents, financial planning, minimizing taxes, and handling investments are the three most overwhelming money-related tasks for respondents to tackle on their own.
Among the affluent in the survey, 47 percent say that minimizing their taxes is the most overwhelming thing about managing money, followed by managing investments (40 percent), and financial planning (33 percent). Tax guidance was also the number-one topic that the affluent who don’t work with a financial professional are interested in receiving help on.
Among total repondents, 27 percent are interested in receiving guidance on retirement income planning, followed by Social Security and Medicare advice (22 percent), developing a financial plan (22 percent), and tax guidance (21 percent).
Other factors that respondents are concerned about include inflation (87 percent), possible economic recession (86 percent), the current political environment (82 percent), and global conflict and crises (80 percent).
Brian Leslie, director of financial planning at Edelman Financial Engine, says that many of the concerns that clients focus on are beyond their control. (A recent study showed that advisors now believe that inflation is the biggest threat to their clients’ successful retirement outcomes.) As a practitioner, Leslie focuses on steering clients toward things they can control, such as creating a plan for long-term care.
“As folks get their arms around things they can control, they do start to feel more confident [about] their situation, and the macro things maybe don’t worry them quite as much,” Leslie says.
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