Pandemic Money Worries Increase Demand for Financial Advisors
High unemployment and pandemic-related stressors have resulted in financial uncertainties for many Americans.
Whether it’s for folks who have extra cash on hand as a result of stimulus money and quarantine savings, or you’re among the millions of Americans who have had their financial lives turned upside down in 2020, financial advisors will play a key role in the years ahead.
Berkshire Hathaway’s Business Wire estimates that “It is likely that investment advisors will see increased demand for their services from investors concerned about the financial fallout of COVID-19. Financial planners may also see increased business from new clients looking to build savings in preparation for future emergencies. “
CNBC reports that for many younger Americans, the pandemic is raising questions about the impact on their lifetime earnings potential and what that means for their longer-term financial security. These concerns, they add, have driven incredible interest in financial markets and advice.
Online streaming platforms like Robinhood and E-Trade allowed for first-time investors to pile money into the stock market at unprecedented rates. Now, the concern is what to do with it moving forward.
According to the Bureau of Labor Statistics, “Employment of personal financial advisors is projected to grow 4% from 2019 to 2029, about as fast as the average for all occupations. As the population ages and life expectancies rise, demand for financial planning services should increase.”
The portion of the population they are referring to are older millennials who will soon reach 40, and Gen Zers who will come up right behind them. The retirement outlook from these populations, though, is bleak.
CNBC reports: “Gen Z and millennials unsurprisingly estimate that Social Security funds will make up a much smaller piece of their retirement savings pie. Gen Z expects Social Security will cover about 15% of their retirement funding, while millennials predict it will be about 17%.”
These dismal numbers mean that the need for alternative retirement plans will be on the rise. Traditional forms of retirement planning come in the form of 401(k)s and Social Security. Both vehicles enjoy the relative safety of being overlooked and managed by your employer and the government, respectively.
Alternative forms of retirement planning include annuities, IRAs, life insurance policies and brokerage accounts. The main, and traditionally less appealing, elements to these types of products are that they are tied to markets and thus more risk. While fund managers and advisors oversee them, they psychologically do not offer the same security as government-backed funds.
Still, the prospect for returns on these products is much higher. Traditional 401(k)s, although also tied to markets, are typically in more conservative, long-term investments.
As demonstrated with the rise of e-trading platforms in the past year, younger generations seem to have an appetite for investing — and risk — that might not have been seen in prior generations.
This will make the role of a financial advisor all the more crucial moving forward as the younger generations will now have to balance the weight of possibly weakened government assistance with the worry of another life-altering pandemic on their retirement expectations.
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