Young American Investors Want to Pay for Financial Advice

Young American Investors Want to Pay for Financial Advice

Young American Investors Want to Pay for Financial Advice


Younger American investors who represent the future customers of the financial advisory business are more interested in paying for financial help than any other age group, according to a survey by a leading asset management research firm.

The survey found that about 50% of all investors polled in Y 2016 are interested in paying for financial advice, up from 40% in Y 2008. But, 79% of investors ages 30 to 39 would like to pay for help, as would 73% of investors under age 30. By comparison, 54% of investors ages 40 to 49 said they would pay for financial advice.

This positive change of attitudes come from the attention surrounding the US Department of Labor’s fiduciary rule set for final implementation in April. It requires retirement advisers to put their clients’ interests ahead of their own by eliminating conflicts of interest on retirement accounts that can lead some brokers to recommend investments that will get them a higher commission or fee.

The rule could save small investors about $17-B a year by keeping them out of risky or inappropriate investments, according to the White House Council of Economic Advisors.

The battle over the rule has garnered attention in the press and in social media that has helped boost awareness of the fact that people pay for these services, one way or the other.

As recently as Y 2010, some 64% of investors thought investment advice was free, or they had no idea whether they paid for it or not. Now, the clueless category is down to 44% of the total.

But there has also been a sharper focus by regulators, the press, and social media users on the need and complexity of making a holistic financial plan.

“We have plenty of online tools, calculators and resources and information from 401(k) providers,” he said. “But those are gateways to advice, not solutions. People are starting to understand what they don’t know.”

Just as pronounced is a shift toward fee-based advice.

Independent, non-commissioned advisers accounted for 41% of the total advisory market in Y 2015, up from 37% in Y 2010, while the share held by traditional commission-based brokers fell from 63 to 59%.

The experts expects independent advisers to manage more than 50% of the business by Y 2020.

Some big brokerage firms got the gist.

Bank of America Merrill Lynch (NYSE:BAC) has been preparing to eliminate all commission-based options for its retirement accounts.

Beginning in April, when the rule is scheduled for final implementation commission-based IRAs will migrate to Merrill’s advisory platform, self-directed brokerage or its robo-advisory service.

Merrill has rolled out a large advertising campaign touting its commitment to fiduciary values, headlined, “We’re committed to your best interest. Not the status quo.”

Meanwhile, a fee-only network of financial planners targeting young investors is off to a fast start.

XY Planning Network has attracted about 350 financial advisers in less than 3 years since it started, according to founder Michael Kitces. He adds that a different relationship model is a must. “Young clients pay for advice from their cash flow, not their assets/portfolios. So while the demand and opportunity is there, it requires a different business model to serve them.”

So that is the future.

Have a terrific weekend.


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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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