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Personal Finance and Advice - US - June 2015

The personal financial advice industry is changing rapidly. Robo-advisers are increasingly popular and the number of financial advisers is shrinking as more retire and fewer are hired to replace them. As a result, competition for advisory clients is increasing, and advisers have to find ways to differentiate themselves from one another and to demonstrate the value-added services they offer.

This report looks at the following areas:

  • Learning to live with robo-advisers
  • Lots of competition for customers

Millennials offer opportunity, but attracting young clients requires advisers to shift their business model to come up with a solution serving the needs of young clients while providing a high quality client experience.

This report includes information about the personal financial advice industry, including how people utilize advisers, steps they have taken toward getting and using financial advice, and their attitudes toward advisers and financial advice in general. “Personal advice” encompasses any guidance received from any type of adviser, including bank advisers, accountants, and insurance agents, as well as from financial advisers who work at different types of investment and brokerage firms.

The world of personal financial advice has always been challenging. The market for it has traditionally been fairly limited as advisers have historically limited themselves to a relatively affluent customer base, leaving young people and those who have limited assets without help. Add to this the fact that many people believe they can manage their money themselves and that the recent recession caused many people to suffer financial losses, whether they used an adviser or not, and the advice landscape becomes even trickier. Now robo-advisers are increasing in popularity, and Millennials are especially interested; they cost less than a human adviser, they are accessible 24/7 in the way that Millennials expect, and they don’t require a large asset base that most Millennials have not yet accumulated. However, Millennials represent the advice customers of the future, so it is critical that advisers find a way to attract them.

Another challenge for the industry is that it is aging. The average age of an adviser is 52 and more are retiring each year than are being hired to replace them. The end result of this is that fewer advisers are available for those who want them, making it more difficult for potential clients to get the guidance they want and need
 

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

          • The issues
            • Learning to live with robo-advisers
              • Figure 1: Attitudes about robo-advisers, by generation, March 2015
            • Lots of competition for customers
              • Figure 2: Interest in using a financial adviser, March 2015
              • Figure 3: Top five factors in choosing an adviser, March 2015
            • The opportunities
              • Millennials and advice
                • Figure 4: Millennials’ use of financial adviser, March 2015
              • Parents are in need of advice …
                • Figure 5: Top financial priorities, by parental status, March 2015
              • And singles are interested as well
                • Figure 6: Interest in using a financial adviser, by marital status, March 2015
              • Impact of upcoming wealth transfer
                • Figure 7: Attitudes toward financial advice and advisers, by generation, March 2015
              • What it means
              • The Market – What You Need to Know

                • JPMorgan Chase and LPL Financial lead
                  • The economy continues to improve
                    • Retirement is the most important savings goal
                    • Market Breakdown

                      • Largest financial services companies
                        • Figure 8: Largest financial services companies, by assets, as of March 31, 2015
                      • Largest broker-dealers
                        • Figure 9: Largest broker-dealers, by revenue, as of firm’s year end, 2014
                        • Figure 10: Largest broker-dealers, by assets, number of representatives, and assets per representative, as of firm’s year end 2014
                    • Market Factors

                      • Unemployment is down
                        • Figure 11: US unemployment, January 2012-March 2015
                      • Consumer saving is up
                        • Figure 12: US personal saving rate, March 2001-March 2015
                      • Increased awareness of need for retirement planning
                        • Figure 13: Personal savings priorities, by generation, June 2015
                    • Key Players – What You Need to Know

                      • Advice is becoming more needs-driven
                        • The industry is aging
                          • Robo-advice is increasing in popularity
                            • New regulations possible
                            • What’s Working?

                              • Advisers are looking to add the human touch
                                • Reaching out to Millennials
                                  • Figure 14: Use of financial adviser, by generation, March 2015
                                  • Figure 15: Vanguard personal financial advice email, 2015
                                  • Figure 16: USAA personal financial advice email, 2014
                              • What’s Struggling?

                                • The aging of the industry
                                  • Figure 17: Factors in choice of adviser, by age, March 2015
                              • What’s Next?

                                • Robo-advice is a challenge
                                  • Figure 18: Attitude toward robo-advice, by generation, March 2015
                                • Wealthfront
                                  • Betterment
                                    • Figure 19: Betterment mobile (2014), online (2015) and print (2014) ads
                                  • LearnVest
                                    • Charles Schwab – Intelligent Portfolios
                                      • Fidelity
                                        • Potential new regulations
                                        • The Consumer – What You Need to Know

                                          • Most don’t want a financial adviser
                                            • Most think their accounts are too small
                                              • Establishing trust with clients is a must for advisers
                                                • Robo-advisers are disrupting the industry
                                                • How Consumers Are Invested

                                                  • Most investments are passive
                                                    • Figure 20: Most popular investments, March 2015
                                                  • Men more likely to have investments
                                                    • Figure 21: Type of investments held, by gender and age, March 2015
                                                  • Breakdown of investable assets
                                                    • Figure 22: Amount of investable assets, March 2015
                                                  • Women have less invested
                                                    • Figure 23: Amount of investable assets, March 2015
                                                • Use of Adviser

                                                  • Most are not interested in using an adviser
                                                    • Figure 24: Use of financial adviser, by interest, March 2015
                                                  • Financial adviser usage increases with household income
                                                    • Figure 25: Use of a financial adviser, by household income, March 2015
                                                • Factors in Choice of Adviser

                                                  • Broad knowledge is a top factor in choosing an adviser
                                                    • Figure 26: Important factors in choice of adviser, by gender and age, March 2015
                                                  • Millennial women especially seek expertise
                                                    • Figure 27: Important factors in choice of adviser, by gender and age, March 2015
                                                • Reasons for Not Using an Adviser

                                                  • Most think their accounts are too small
                                                    • Figure 28: Top reasons for not using an adviser, March 2015
                                                • Financial Priorities

                                                  • Saving is most important
                                                    • Figure 29: Financial priorities, March 2015
                                                  • Higher incomes change priorities
                                                    • Figure 30: Financial priorities, by household income, March 2015
                                                  • Saving is for Gen X and Boomers
                                                    • Figure 31: Financial priorities, by generation, March 2015
                                                    • Figure 32: USAA financial readiness score direct mail ad, 2015
                                                    • Figure 33: Thrivent retirement seminar direct mail ad, 2015
                                                    • Figure 34: Wells Fargo financial review email, 2015
                                                • Attitudes toward Financial Advice and Advisers

                                                  • Challenges for the advice industry
                                                    • Figure 35: USAA financial guidance direct mail ad, 2015
                                                    • Figure 36: Attitudes toward financial advice and advisers, March 2015
                                                  • Millennial women are harder to engage, but offer great potential
                                                    • Figure 37: Attitudes about financial advice and advisers, by gender and age, March 2015
                                                    • Figure 38: PNC Bank retirement readiness direct mail ad, 2015
                                                  • Consumers express a sense of distrust
                                                    • Robo-advisers just as good as humans?
                                                      • Figure 39: Attitudes toward financial advice and advisers, by generation, March 2015
                                                    • Young people need to be shown options
                                                      • Figure 40: Attitudes about financial advice and advisers, by generation, March 2015
                                                  • Steps Taken toward Financial Planning

                                                    • The recession spurred interest
                                                      • Figure 41: Steps taken toward financial planning, by gender, age, and household income, March 2015
                                                    • Gender differences disappear with age
                                                      • Figure 42: Steps taken toward financial planning, by gender and age, March 2025
                                                      • Figure 43: Wells Fargo budgeting webinar ad, 2015
                                                      • Figure 44: USAA retirement plan email, 2014
                                                  • Advice and Retirement

                                                    • The perfect retirement
                                                      • Retirement saving is a concern
                                                        • Figure 45: Personal financial priorities, by generation and marital status, March 2015
                                                      • Opportunity among Hispanics may increase
                                                        • Figure 46: Personal financial priorities, by Hispanic origin, March 2015
                                                      • Consumers don’t look to advisers for retirement planning
                                                        • Figure 47: Attitudes toward advice and retirement, March 2015
                                                      • Women and Gen X are least confident about retirement
                                                        • Figure 48: Attitudes toward advice and retirement, by gender and generation, March 2015
                                                      • Retirement advice and preparation are needed
                                                        • Figure 49: Steps taken toward financial planning, by generation, March 2015
                                                      • People with more investments are more prepared
                                                        • Figure 50: Steps taken toward financial planning, by number of investments or investment accounts, March 2015
                                                    • Number of Investment Accounts

                                                      • How many accounts do people have?
                                                        • Figure 51: Number of investments or investment accounts, March 2015
                                                      • One quarter of Millennials have no investments or investment accounts
                                                        • Figure 52: Number of investments or investment accounts, by generation, March 2015
                                                      • How many accounts before an adviser is used?
                                                        • Figure 53: Use of adviser, by number of investments or investment accounts, March 2015
                                                    • Number of Financial Priorities

                                                      • Millennials: How many financial priorities do they have?
                                                        • Figure 54: Number of financial priorities, by generation, March 2015
                                                      • Types of investments consumers hold
                                                        • Figure 55: Type of investments owned, by number of financial priorities, March 2015
                                                      • Use of financial adviser
                                                        • Figure 56: Use of financial adviser, by number of financial priorities, March 2015
                                                      • Consumers with several financial priorities are more likely to have a financial plan
                                                        • Figure 57: Financial planning behavior, by number of financial priorities, March 2015
                                                    • Appendix – Data Sources and Abbreviations

                                                      • Data sources
                                                        • Consumer survey data
                                                          • Consumer qualitative research
                                                            • Abbreviations and terms
                                                              • Abbreviations
                                                                • Terms

                                                                Companies Covered

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                                                                Personal Finance and Advice - US - June 2015

                                                                £3,277.28 (Excl.Tax)