Survey: Most Americans Don’t Use Financial Advisors — How is That Changing Because of COVID, Inflation and Economic Uncertainty?

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Many people get their first financial advice early in life — perhaps when they earn their first dollar, and their parents advise them to put a quarter of it into the piggy bank. When it comes to adults hiring financial planners, however, most take a pass.

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Even though more than six in 10 Americans (62%) say they need to improve their financial planning, only 35% seek the help of a professional financial advisor, according to the “2022 Planning & Progress Study” — a new survey of 2,381 U.S. adults released last week by Northwestern Mutual.

However, those numbers are ticking upward in the wake of the COVID-19 pandemic. The survey found that nearly one-fifth of respondents (18%) who didn’t have an advisor before the pandemic now either have one or plan to hire one. Younger Americans are slightly more receptive to the idea, with 29% of Gen Z and 24% of millennials either working with (or considering) hiring a financial advisor post-pandemic.

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The study also found that 80% of respondents who get help from a financial advisor say they were able to build their savings during the pandemic. Among those who don’t work with an advisor, only about half (49%) were able to save more.

“There are some clear silver linings in these numbers,” Tim Gerend, Northwestern’s executive vice president and chief distribution officer, said in a press release. “Despite the fact that too many Americans are still not getting financial help, we saw a spike last year in the number of people seeking professional advice and those numbers have held stable in 2022 rather than sliding back to pre-pandemic levels.”

Financial planning has become even more challenging in recent months because of surging inflation, a faltering economy and a floundering stock market. This could lead to even more Americans hiring a financial advisor.

The survey, conducted earlier this year by The Harris Poll, found that 78% of respondents who have an advisor enjoy financial certainty in terms of debt management, retirement planning, housing stability and other areas related to money. That compares to 57% of respondents who don’t work with an advisor.

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“A range of factors impact the stability and certainty people feel in their lives,” Gerend said. “But a good, trusted advisor can be an enormous help from a practical and emotional perspective, and that extends to people across all ages and circumstances.”

Hiring a Financial Advisor — Costs and Fee Structures

If you are considering hiring a financial advisor, there are some things you need to know about costs and fee structures.

The typical cost is 1% per year of your assets under management (AUM), according to Kyle Ryan, a certified financial planner and executive vice president of advisory services at Personal Capital. If you have $100,000 of assets under management with a financial advisory firm, for example, your annual expense would be $1,000. But there’s no hard and fast rule about how much advisors must charge, so your cost could be lower or higher depending on your AUM, Ryan told U.S. News & World Report.

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In 2021, the average financial advisor fee was 1.02% for a $1 million account in 2021, U.S. News reported, citing data from AdvisoryHQ. For a $50,000 account, the average was closer to 1.2%, and for a $30 million account the average was 0.59%.

Most financial advisors get paid in one of the following three ways:

  • Fee-only, in which advisors charge an annual, hourly or flat fee. The most common structure here is a percentage of your assets under management.
  • Commission-based, in which advisors are paid through the investments they sell. Advisors will receive a percentage of your investment dollars from the investment provider.
  • Fee/commission combo, in which you will be charged a combination of a fee and commissions.
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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

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