Financial Advisors Get Little Respect
The late, great comedian Rodney Dangerfield never got any respect. Even as a child he had issues, “When I was a kid I got no respect. The time I was kidnapped, and the kidnappers sent my parents a note they said, ‘We want five thousand dollars or you'll see your kid again.’"
The financial advisor industry is feeling Rodney’s pain. As a long-term financial advisor, my industry is making little progress in gaining the respect of investors. I am speaking about the industry in general and not any particular advisor or segment of the advisor business. There’s a lot of work to be done.
Here’s what prompted me to write about this topic. I was reading the 2013 BlackRock Global Investor Pulse survey. The aim of the survey is to take the pulse of investors on a regular basis and understand their financial needs and investment behaviors. The report published by BlackRock included findings in the U.S., where 4,000 investors and 500 financial professionals were interviewed in summer and fall of 2013.
The survey uncovered a strong concern about the lack of confidence among U.S. investors. About half do not feel in control of their financial futures and are not confident they are making the right savings and investment decisions. They are seeking answers on how to better manage their money for the future in order to achieve their financial goals.
You would think that investors would embrace financial advisor to assist them with these concerns. But, that’s not what the survey said.
BlackRock carved out U.S. retirees in the survey and asked them a series of questions about what advice they would give to themselves at a younger age about saving and investing. The retirees’ answers were compiled and percentages were assigned to the frequency of the answers.
The top three recommendations that retirees would have given to themselves were to start saving earlier in an employer-sponsored retirement plan (36%); spend less money while working (32%); and keep working beyond normal retirement age (21%). All of these are good ideas that are frequently discussed by financial advisor.
Here’s the kicker: in retrospect, only 12% of the retirees surveyed said they would have sought professional financial advice. I find that odd because all the advice the retirees would have given themselves would likely have been discussed had they sought the help of a professional adviser while they were working.
There’s a disconnect between how the public perceives the role of a financial advisor and what we do.
Perhaps the low value placed on professional financial advice is due to how investors perceive that role of an advisor. For those who did have an advisor, the BlackRock survey found the top issue discussed was how to seek out the “best” returns (35%). Retirement planning was further down the list (30%), and creating an asset allocation to generate income and control risk was lower (27%).
That’s backwards. Financial advice is not about finding the best returns. It’s about creating a plan so an investor feels more comfortable about their financial future and help build confidence when making decisions. This is done through prudence, diligence, honesty, transparency, integrity, and putting clients’ needs first and foremost.
Some say that Bernie Madoff and a few other bad apples permanently spoiled the advisor industry. They say this is the reason many investors don’t trust advisors. I don’t agree. There are bad characters in every industry. I do believe there is more front page headline news from the investment industry because scandals involving money make good theater. This likely has influenced the public’s perception of advisors. It’s a stereotype the industry needs to address directly.
Professional financial advisors exist to help people answer important questions about managing their money to achieve their financial goals. In order to do this job, we need to regain the trust and confidence of the public. The industry needs to take control of its future and work hard to increase respect among investors. It is the only way we can make a larger impact in helping current and future retirees secure their financial future in America.