05.19.21
Uptick in Perceived Need for Advisors During Pandemic, Longer-Run Trend Troubling
by: The Kehrer Bielan Team
After several years in which a dwindling number of U.S. households felt they needed advice from a financial advisor, there has recently been an uptick in the number of households that now prefer to work with a professional financial advisor, according to the Macromonitor, the largest, most comprehensive database on consumer financial behavior.
The Consumer Financial Decisions (CFD) Group at Strategic Business Insights collected 2020–21 Macromonitor data in July through September 2020—approximately four months into COVID-19 shutdowns and two months after stimulus checks began to arrive.
“Essential workers were still on the job, the majority of white-collar workers were able to work from home, and many small businesses were still in operation. Some people receiving stimulus checks were able to save, invest, or pay down debt. Life (except for the very wealthy, who are more inconvenienced than harmed) changed as the recession ground on,” commented Larry Cohen, director of CFD. “Because attitudes change before behaviors do, attitude trends directionally signal changes most likely to happen.”
On the other hand, Cohen sees the bump in interest in professional advice as a temporary deviation from a long-run trend, “After the longest-running bull market in history, only 12% of U.S. households mostly agree that they consult with a specialist when making financial decisions…Having survived the Great Recession, some households (with assets) are skeptical of professional advisors. Other households make the mistake of thinking that their expertise (their knowledge)—not the bull market—is responsible for increasing assets.”
His analysis suggests that there is a narrow window for financial institutions to engage with clients about the value of professional financial advice, but banks and credit unions are not well positioned to take advantage of the trend. The investment services businesses inside many financial institutions suffer from chronic underinvestment on the part of the host institution, lagging other providers of financial advice in their adoption of new technologies and innovations. In particular, banks and credit unions have failed to deploy a sufficient number of advisors to keep up with the growing opportunity to deliver financial services to the institution’s customers/members. According to Kehrer Bialan research, the typical financial institution would need to more than double its number of advisors in order to achieve optimum coverage of the opportunity.
Are we focused on this opportunity? Can the shift to virtual interaction with clients broaden the reach of our shorthanded advisor force?
Since 1978, the MacroMonitor—a comprehensive, biennial survey of U.S. households—has offered financial-services providers reliable, validated, single-source research about U.S. economic households' needs, attitudes, and behaviors. The MacroMonitor measures all financial areas: transactions, credit, assets, protection, and information and advice. Each wave of the survey encompasses over 4,000 U.S. households, including an oversample of 1,500 affluent households reweighted to be representative of the U.S. population. The MacroMonitor is clearly the gold standard of consumer financial databases.