My first attempt at riding a bike was scary. I didn’t know how to do it, and had an intense fear of falling. Sure, training wheels help, but you have to take them off to truly learn how to ride. My dad came to my aid. He held onto the seat, ran alongside me, and kept telling me I could do it.
Life lesson #1: Having someone there to help when you lack confidence is a good thing.
Fast forward a few decades, and my daughter will start driving next year. As we begin to think about the right car for her, my wife and I marvel at how many safety features are found in today’s automobiles, particularly to protect novice drivers.
Life lesson #56: Machines can be a terrific complement to human skill.
These lessons came to mind as I reflected further on findings from our Global Investor Pulse survey. In my first blog post around the results, I discussed the topics that were most on investors’ minds—longevity, health care and retirement, and the importance of confidence in financial success. The research shows only 39% of Americans are confident in their financial decision-making. Today, I’ll discuss the influencers—the resources that can help, and the benefits investors can enjoy if they use them.
Somebody get me a doctor
When fighting the common cold, it’s typical to curl up in bed and ride it out. But when health issues turn more serious, it’s usually best to get a professional opinion. Similarly, when our financial matters evolve into retirement planning, seeking some professional help generally bestows a benefit. Our survey found that 26% of Americans are using a financial advisor. Among those with more than $250,000 in investible assets, the number jumps to 59%.
Advised Americans are more confident in their financial decision-making, encouraging them to put more money to work. Beyond that, the two key benefits of working with a financial advisor are: 1) The advisor’s ability to create a financial plan that an investor can follow through time; and 2) the advisor’s ability to explain investment risks and offer insight on how to navigate them. For the most part, those with advisors seem happy to have one: 71% claimed overall satisfaction; only 5% reported overall dissatisfaction.
Risk matters, in more ways than one
Understanding risk is key to advisor satisfaction. About half of advised investors feel very well informed about the risks in their portfolio. Those who feel well informed about risk are nearly four times as satisfied versus the uninformed.
Understanding risk is also a catalyst for action. One-third of investors feel certain they would invest more if they had a better understanding of risk in their portfolios; another third would possibly invest more with a better understanding of risk. For those who sit on the sidelines, overcoming the fear of investing risk may pave the way to a more financially secure retirement.
Those marvelous machines
It’s becoming increasingly common for investors to use technology to engage with their money—and for good reason. Technology is helping Americans take action to improve their financial future or adjust to a more realistic understanding of their finances.
89% of those who manage their investments online say it has had some positive impact on their behavior as investors. Additionally, 78% can describe a way that using online tools to monitor retirement savings has prompted them to take action.
While only 9% have actually purchased investments online in the last 12 months, 54% said they would consider buying online. But the human touch still matters. Among the considerers, 55% would use technology in addition to an advisor, not instead of one.
Human behavior is a funny thing. We often shy away from doing things we are unsure of, or that seem difficult. Seeking help seems to be an elixir for getting started. Our study clearly identifies the connection between advice and guidance, be it human or technologically driven, and confidence in investing. And that seems to be the ticket to a more successful retirement.
I learned early on: Seeking help is a virtue, not a vice. My dad was there to help me ride my bike. All I had to do was ask.