Headlines you need to know this week
Nobel laureate: Human advisors are importantDespite the rise of robo-advice, human financial advisors are important to the industry, noted Nobel Prize-winning economist Daniel Kahneman at a recent conference. Communicating with a human advisor helps clients define their needs and concerns. Advisors can also help ease a client’s fears about finances. Robo advice, which has grown to more than $200 billion in assets under management, has been a disruptor in the industry, he noted.
Relationship-building is key to engage the next generationAn estimated $30 trillion in wealth is expected to transfer to heirs in the next several decades. However, only about one-third of advisors have an asset-transfer plan in place, according to a recent study. About 90% of advisors say their relationship with clients is critical to their business. At the same time, the majority of advisors note they only meet once a year or less with their clients’ heirs.
Millennials hope to retire at age 56Most millennials expect to retire at age 56, according to a recent survey. More than half (53%) expect to become millionaires, the study noted. While 38% said they have already started saving for retirement, 17% are still financially dependent on their parents.
Regulators allow paperless financial reportingThe Securities and Exchange Commission recently voted to allow investment firms to post digital fund reports online instead of mailing paper copies to investors. Under the new e-delivery rule, which takes effect January 1, 2021, paper reports must be provided to any investors who request them.
Mobile wealth management sees fast growthMobility in financial services has grown significantly. A recent study found that mobile wealth management products grew 300% in the past year, largely driven by the banking sector. Mobile devices now make up the majority of web traffic visits, according to digital marketing research. At the same time, many banks and financial firms are seeking strategies to blend digital and human communications due to the importance of relationships in wealth management.
Workers may tap retirement savings for other expensesA recent report found that 54% of workers stressed about finances and 64% with student loan debt believe they would likely use retirement savings to cover expenses other than retirement. More than half (54%) noted they would be open to help, and would like to have someone validate their financial decisions. The top concern for Millennials and Gen X workers is not having enough emergency savings. Among Boomers, nearly half (46%) said the top concern was not being able to retire when they want.
Most advisors do not have a succession planLess than half (37%) of financial advisors have a succession plan, according to a new report. Respondents cited several obstacles including the challenges of planning for an event that is many years in the future, and the length of time required to craft a succession plan. More than half of advisors surveyed said they worked on several plans before finding a solution that worked.
Advisors say clients are more optimistic about retirementNearly half (46%) of advisors report that clients who are working are optimistic about saving enough for retirement, up from 10.6% in 2015, according to Financial Advisor’s Retirement Planning Survey. Only 12% found that clients were less optimistic. Health-care costs in retirement are a concern. A full 63% of advisors said they provide some advice on health-care planning, while 20% noted they provide extensive planning.
Men more likely to replace charitable giving with impact investingA study found that men are more likely to replace charitable giving with impact investing. The Women’s Philanthropy Institute noted that women were more likely to make both allocations and not replace one for the other. Impact investors were younger, with Millennials comprising 42.7% and Gen X representing 35.1%. Among younger investors, more men participated in impact investing. But among Baby Boomers, more women were impact investors.
Investors seek tax expertiseFinancial advisors may want to highlight tax expertise when seeking new clients. According to a new report, 66% of affluent consumers cite tax knowledge as a priority when seeking a financial professional, and 47% of the respondents said they associate a CPA designation with financial advice.
Gen Xers put off saving for retirementBurdened by debt, including credit card and student loan debt, many Gen Xers are putting off saving for retirement. In a recent survey, 50% of Gen Xers stated that they cannot save for retirement until they pay off their credit card debt. Gen Xers also have an average non-mortgage debt of $23,000. A full 63% polled believe “everything will just work out” when it is time to retire.
Retirement challenges not unique to the United StatesIndividuals planning for retirement in several countries share many of the same concerns as those in the United States, an international survey found. The study, which surveyed individuals in the United States, United Kingdom, and Australia, found that respondents were concerned about how much to save for retirement and assessing the impact of longevity risk and health-care costs.
Income uncertainty weighs on women’s risk toleranceWomen may be less risk tolerant than men but the catalyst is income uncertainty, according to a University of Missouri study. In analyzing more than 2,200 unmarried individuals in the Survey of Consumer Finances, researchers found that women are more likely to have uncertain incomes from one year to the next. Life events and caregiving affect income levels. The study also found that men and women receive different types of advice from advisors.
Millennials drive growth in sustainable investing: studyMillennials are driving growth in the $9 trillion sustainable investing market, a Morgan Stanley study found. Interest among millennials grew to 86% in 2017 from 84% in 2015. Millennials are twice as likely to invest in funds with social or environmental goals. Investment products focused on sustainable investing grew at a rate of more than 33% from 2014 to 2016.
Financial literacy an issue for retirees, especially womenA recent survey from the American College of Financial Services found that retirement-age women lagged men in their knowledge about securing income in retirement. Although neither group were high scorers, 18% of women passed the college’s retirement-income literacy quiz, compared with 35% of men. The study also noted that effective planning is linked to financial literacy.
Advisors organizing family meetings to talk wealth transferMany financial advisors are introducing new programs and ideas to talk to their clients, as well as their families, about wealth transfer, CNBC reports. With more than $30 trillion expected to move from boomers to the next generation in the coming decades, heirs will likely need guidance. Some are organizing meetings with multiple generations. Younger advisors are also playing a role in this business building effort.
Robo-users prefer human advisors when creating a planDespite the rise in use of robo-advisors, many investors prefer to work with a human when crafting a financial plan, according to Investor’s Business Daily. Among investors using a robo-advisor surveyed by the Spectrem Group, only 13% cited the robo as their primary advisor, while 18% said they use a full-service broker as a primary advisor. A full 66% said human advisors did a better job creating financial plans and 50% said people were more capable of making changes to those plans.
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