What would you not tell your financial advisor about your finances?
By Securian Financial Group
For most people, the answer is "nothing" - they understand that their advisors need complete information to create viable plans.
But, for a surprising 29 percent of respondents in a survey conducted by Securian Financial Group, the answer is: Lots of things.
Securian wanted to know what this group - most of whom are over 40 and affluent - is holding back and why. The answers could help financial advisors better understand client behavior and lead to a more complete and satisfying financial planning experience for their clients and for themselves.
Methodology and demographics
The survey was conducted June 6 - 10, 2013 with an online consumer panel of 720 people age 30 and older who work with financial professionals.
One fifth (21 percent) are considered affluent, with annual incomes of $150,000 or more. About two thirds (68 percent) are middle market or mass affluent, with $50,000 - $149,000 in annual household income.
One-third of the respondents were in their 30s - members of Generation X and some millennials.
Specific areas of interest explored in the survey include:
- Whether they work with one advisor or multiple advisors to manage their accounts
- Whether they consult with their advisor(s) about non-financial issues
- Whether they are completely forthcoming with their advisor(s) about their financial situations
- Closeness of advisor relationships
When asked about the nature of their relationships with their advisors, the majority of respondents indicated relatively high levels of trust and closeness. Nearly 90 percent said they work with one advisor or have a primary advisor. Nearly 68 percent consult with their advisors at least quarterly, with about one-fourth consulting their advisors "at least monthly."
Trust (48 percent) and expertise (22 percent) are the qualities respondents use most often to describe their relationships with their advisors. A sizable group consults their advisors about nonfinancial issues relating to their personal or professional lives. When asked to select all that apply, 72 percent of that subgroup said they consult their advisors about personal life goals and 61 percent discuss their careers. Issues with family and spouses were selected by about one-fourth (24 percent) of the people who answered this question.
The majority (71 percent) of people in the Securian survey indicated they share with their advisors all topics related to their personal financial situations. But a significant percentage (29 percent) hold
some information back. These secrets run the gamut - health problems, family issues, employment changes, loans to others and debt.
The information some clients withhold could seriously undermine a financial strategy. A chronic or critical illness, for example, could cancel plans to work beyond retirement age. Marital difficulties that result in divorce almost always create financial setbacks. Investments made without consulting a financial professional who has access to sophisticated expertise could become bad bets. A financial advisor cannot provide proper guidance without having all the facts.
Who are they?
The demographics of the 206 respondents who keep financial secrets from their advisors show that about one third are under 40. They are almost evenly divided between men and women but vary widely in household income. Two thirds are middle market or mass affluent, with incomes of $50,000 - $149,999 per year and nearly 92 percent are employed. Of the 190 who are employed, approximately two thirds (65 percent) are professionals or in management. Eight percent are small business owners.
Why the secrecy?
People keep secrets because they feel it's nobody's business, there's someone they don't trust, or they fear the consequences of others finding out. Securian's survey shows that more than half of respondents who keep financial secrets from their advisors simply feel the information is too personal to share. Another group decided the information would not affect their financial strategy. One-fifth said they are "embarrassed" to share the information.
These people know that keeping financial secrets could have serious consequences. When asked, the majority indicated that if their advisors had the complete picture, they likely would recommend changes: Twenty-nine percent said their advisors would suggest they save more; one-fourth (25 percent) said they'd probably have to create a new financial plan.
Next steps for advisors
Advisors know that some clients have personal issues that prevent them from sharing some aspects of their personal finances. Securian's study quantifies the extent to which clients are keeping secrets that could have a significant impact on their financial security.
Avoidance and distrust have always been hurdles for advisors to overcome. The data in this study helps them understand what some clients are withholding and why.
To provide the best financial strategies for their clients, advisors will do what they've always done: Be patient, educate and look for opportunities to prove they are trustworthy.