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Money Concerns and People That Financial Advisers Ignore

A study finds little interest in non-retirement goals and non-breadwinner spouses


In a time when so many people in their 50s and 60s sorely need financial advisers, a new report finds that money pros are often ignoring many of their goals. The result: bad advice or no advice on key financial planning issues for boomers. And wives who aren’t breadwinners get especially short shrift.

The report, State of Advice and Guidance 2017, was conducted by Hearts & Wallets, a data and consulting firm focused on the drivers behind retail investor decision making. Drawing on its database of 35,000 households, the researchers zeroed in on what they call “late career consumers” — people age 53 to 64 who don’t intend to stop working within five years.

Hearts & Wallets wanted to see how these people would be treated by four types of advisers: full-service (ongoing relationship with a financial pro); mid-service (periodic interactions with phone-based reps supported by online tools), self-service (online tools to provide answers with minimal assistance from reps) and digital engagement (introductory online games intended to engage, but not provide substantive answers).

Meet ‘Bob’ and ‘Ann’

To find out, Hearts & Wallets invented a hypothetical affluent couple — “Bob” and “Ann,” ages 56 and 51, respectively. Then, it sent information about them to the heads of financial advice at 39 firms to see what the advisers would recommend to achieve their top goals. Those goals were paying for college for their two youngest kids; figuring out when Bob could retire; determining how much they could pay for the wedding of their oldest daughter, a recent college grad; learning whether they could help Bob’s mother, who was in deteriorating health and would soon deplete her assets and understanding whether the couple should buy long-term care insurance.

“Bob and Ann would have been disappointed by most experiences,” said Hearts & Wallets CEO and founder Laura Varas. “Their questions were rarely answered; very few experiences integrated their goals.”

A thumbnail description of Bob and Ann: They have investable assets of $792,000, and are New Jersey homeowners. Bob works at XYZ Corp. ($170,000 pay) and, Hearts & Wallets said, the company “has not been doing well for the past year.” Ann earns $28,000 as a self-employed tutor. Ann may get a $600,000 inheritance; Bob has $320,000 in his firm’s 401(k) and $190,000 in its employee stock purchase plan. Ann has a $38,000 IRA rollover; the couple has a $66,000 brokerage account, $26,000 in the bank, $152,000 in college savings plans and life, health and disability insurance.

What Financial Advisers Didn’t Care Much About

The advisers didn’t offer the couple much help in achieving their goals that weren’t investing or retirement related.

Although 77 percent of experiences focused on the couples’ retirement strategy, only 5 percent addressed helping Bob’s aging mother and a mere 13 percent discussed long-term care insurance.

Just slightly better: 26 percent answered the questions “Can we pay for college?” and “How much can we pay for the wedding?”

Marginalizing the Wife

Sadly, Hearts & Wallets found a distinct lack of interest in Ann, who was marginalized — especially by the self-service and digital firms.

“So many of the experiences ignored Ann’s contribution to the household,” said Varas. “That’s offensive. She’s six years younger than Bob; if he’s forced out of his job, her $28,000 becomes really important.”

Only 54 percent of the advisory experiences provided a retirement age recommendation for Ann. By contrast, 97 percent provided one for Bob. Similarly, just 21 percent addressed life insurance for Ann and only 49 percent acknowledged Ann’s anticipated $600,000 inheritance.

Varas believes Ann’s experience in the Hearts & Wallets test represents a serious issue among financial advisers and the people who use them or might someday — the firm calls it “the invisible spouse or partner” problem.

“You don’t have to scratch your head about why some financial firms are having trouble connecting with women,” Varas said.

Vastly Different Saving Recommendations

But even savings and investing decisions for the couple got little attention in many cases.

Asset allocation recommendations were often not included. And the inconsistent approaches to integrating Bob’s and Ann’s goals led to vastly different recommendations for how much they should save annually. For example, the digital engagement advisers said the couple should save $6,198 for emergencies annually (about 3 percent of their income), but the full-service advisers urged $18,775 (closer to 9 percent).

Danger: Iceberg Ahead!

Also, Bob’s high investment concentration in his company’s stock — what Varas calls “a huge iceberg” — was rarely addressed.

That’s particularly problematic because, as Hearts & Wallets clearly noted, Bob’s employer isn’t doing well. If it takes a hit, so could the couple’s finances.

Full-Service Advisers vs. Self-Service

The Hearts & Wallets researchers were more impressed with the full-service and mid-service firms than with the self-service and digital engagement ones. Full-service experiences focused on overall financial wellness most frequently for Bob and Ann, for example.

But fewer than 10 percent of the digital engagement and self-service experiences answered the question, “Can we pay for college for our children?” None of the digital engagement experiences and only a third of the self-service ones recommended asset allocation percentages.

“Emergency fund savings were ignored by most of the digital engagement and self-service experiences,” said Varas. “But having an emergency fund has been the No. 1 financial goal of Americans.”

Varas said that “self-service” advisers (sometimes called robo-advisers) “historically are trying to be as cheap as possible, so they build something streamlined and leave things out,” such as dealing with inheritances. All the full-service experiences included Ann’s inheritance, however.

What ‘Late Career’ People Want From Financial Advisers

The Hearts & Wallets report had one other important finding about “late career” people that financial advisers should take seriously: These customers place a high importance on advisers’ explaining things in understandable terms with fees that are clear and understandable.

So, financial advisers, all you need to do is help these people with their financial goals, treat women appropriately, speak in plain English and be transparent about fees. Is that asking too much?

Richard Eisenberg
By Richard Eisenberg
Richard Eisenberg is the Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and Managing Editor for the site. He is the author of How to Avoid a Mid-Life Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch.@richeis315

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