Retirement Confidence Rises but Remains Weak, With Majority Still Worried About Funding their Senior Years - Deloitte Center for Financial Services Survey

Survey also finds a big disconnect between financial advisors and consumers

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May 04, 2015, 09:46 ET

NEW YORK, May 4, 2015 /PRNewswire/ -- More consumers feel secure in their efforts to save for retirement than they did in 2012, according to a Deloitte Center for Financial Services survey released today – but the majority (55 percent) of those surveyed still do not feel financially set for their senior years despite improved economic conditions.

Forty-five percent of respondents feel "very secure" in having enough savings and income to maintain a comfortable retirement lifestyle, a sizable jump from the 28 percent in Deloitte's initial survey in 2012.

The report's authors say this positive increase could be a direct result of strong recent growth in investment returns, and are concerned this sentiment could be "fleeting." This could be reversed by a downward shift in the economy or rising interest rates, which could influence stock market volatility.

"Despite a booming stock market and the financial crisis now more of a distant memory, what we hear from most consumers is they are simply not being effectively engaged by financial institutions and their representatives, including a significant segment of those with substantial assets to invest," said Dan Rosshirt, a principal with Deloitte Consulting LLP. "Financial services firms should take the initiative in a bigger and bolder way, reestablishing their credibility as a provider of solutions rather than primarily product sellers."

An opportunity presents itself as retirement planning comes back in the spotlight, with President Barack Obama advocating in February for greater fiduciary responsibility among advisors to put their clients' best interests ahead of their own when offering retirement advice. Even more importantly, the Department of Labor released a re-proposed rule in this area last month.

The survey finds that the industry's reputation has room for improvement: Fewer than one-third (29 percent) of consumers in the current survey felt that financial institutions in general were highly trustworthy, while only one-third of respondents felt that way about financial professionals overall.

But that response was different when it came to assessing their own financial advisor, with 78 percent of respondents saying that they trusted them, compared to 68 percent in 2012.

This survey is distinctive in that it not only took the pulse on consumer sentiment towards retirement, but also surveyed financial advisors who offer retirement services. Consumers' sentiments almost matched the perception of financial professionals themselves: Almost three-quarters (74 percent) of surveyed financial advisors felt the level of trust with their own clients has gone up. Likewise, more than 4 in 5 (82 percent) of surveyed advisors also believed that their clients have a great deal of trust in them to "act in their best interests."

However, there are significant trust issues to overcome. For example, only about half (52 percent) of the advisors surveyed feel that their clients trust the products they offer to help meet their retirement goals. As the report notes, "perhaps this has to do with advisors' lack of familiarity with these products or the tools they are given to educate clients about them. In either case, this is certainly one area for financial institutions to further explore opportunities to make sure their products truly serve consumers' retirement goals and are relatively easy for average consumers and financial advisors to understand."

In the words of one financial advisor, "Trust has gone up, but so has the market. We have a long way to go in the transparency department."

"If the financial industry wants better results for clients, they should make retirement advice and planning a top priority and deliver planning offerings that are focused on the needs and desired outcomes of the client," said Sean Cunniff, senior manager with Deloitte Services LP, and investment management research leader for the Deloitte Center for Financial Services. "Advice and retirement planning programs can supplement the educational programs, build product awareness, help clients set their financial priorities, and provide a path to transition clients from 'do-it-yourselfers' to advice-seekers."

Among other survey findings:

Nearly a third of respondents with a net worth of at least $1 million and close to retirement age say that they have not consulted a professional for their retirement needs, in many cases because they believe they can do a better job themselves. This marks a missed opportunity for financial institutions targeting this highly coveted segment of investors.
Those with a formal retirement savings and income plan were more than twice as likely to feel secure about their retirement as those without one. Of those consumers surveyed who felt very secure about retirement, a startlingly high number – 17 percent – did not have either a financial advisor or a retirement plan.
The workplace is emerging as a potentially fruitful venue for engaging individuals in broader retirement planning, with surveyed consumers ranking workplace retirement plans as the second-most trusted source for financial information, ahead of an individual's primary financial institution and behind only his or her primary financial advisor.
Another challenge for many financial institutions to contend with is consumer "inertia." One in 5 respondents said they don't have a retirement plan because they haven't taken the time to meet with a financial professional. Three in 10 said they intend to put a plan together, but haven't set aside the time to do so.

The report, titled "Making Retirement Security a Reality: What Can Financial Institutions and Advisors Do? and published by Deloitte University Press, is available here.

Survey Methodology
The Deloitte Center for Financial Services commissioned Andrews Research Associates to conduct an online survey of 2,000 U.S. consumers in September 2014, focusing on the factors impacting respondents' feelings of security around retirement finances. The consumer data was supplemented with in-depth telephone interviews with 178 financial advisors.

About the Deloitte Center for Financial Services
The Deloitte Center for Financial Services, launched in 2007, provides insight and research to help improve the business performance of banks and capital markets firms, private equity firms, hedge funds, mutual funds, insurance providers, and real estate organizations operating globally. Headquartered in New York City, the Center is staffed by a group of professionals with a wide array of in-depth industry experience, as well as cutting-edge research and analytical skills.

As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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