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| Source of Financial Information and Advice By Age Group | ||||
|---|---|---|---|---|
| 18-29 | 30-49 | 50-64 | 65+ | |
| Friends and Family | 57% | 50% | 33% | 33% |
| Financial Websites | 42% | 43% | 31% | 23% |
| Social Media | 42% | 24% | 10% | 4% |
| Banks and Credit Unions | 34% | 35% | 31% | 27% |
| Books | 30% | 26% | 13% | 8% |
| Financial Advisors | 27% | 40% | 45% | 51% |
Gallup also found that the higher a household’s income, the more likely they are to use a financial advisor. For example, only 20% of those with a household income of less than $48,000 use financial advisors/planners, compared to 54% of those making at least $90,000.
Factors like comfort using technology may play a role, but the generational divide also likely correlates with how wealth changes over time.
It’s easier to manage basic investments when you’re younger and have fewer assets, said Craig Copeland, director of wealth benefits research with the Employee Benefit Research Institute (EBRI). However, as you accumulate assets and approach retirement age, there will likely be more opportunities for a financial advisor, such as assistance with transitioning into retirement and managing the transition from growing investments to spending down your portfolio, he added.
Why People Choose to Work With a Financial Advisor
People may turn to financial advisors for various reasons. For one, those with lower asset levels might not have as complicated financial needs now, but having a foundation in place could help as you accumulate wealth over time.
EBRI research found similar results to Gallup, with 37% using an advisor, but among those who don’t, nearly half said they expect to work with a professional in the future.
The top reason workers seek help from an advisor is to determine if they’re saving enough for retirement, with 49% also wanting to know how to save and invest more for retirement outside of their workplace plan.
Advisors can also help with more niche areas. About 27% of workers seek professional help from an advisor to reduce debt, as well as to create a will or estate plan. One-quarter of workers also turn to advisors for help with life insurance.
While there are many other ways to get help with these types of areas, such as through friends and family, who are often the first source for most, it’s challenging to rely on what non-professionals tell you.
“Friends and family often have a better understanding of an individual’s financial situation, allowing them to offer more personalized advice. This is a key strength,” said Yixiao Jiang, an assistant professor of finance at Western New England University. “However, personalized advice is not always reliable, especially when it comes from individuals with limited financial literacy.” To feel more confident in this advice, “seek a second opinion from a professional financial advisor or use AI tools to verify the validity of the recommendations,” Jiang said.
Similarly, a wealth of information is available, including from professionals, through sources such as financial media and social media.
Yet the problem is that there’s so much information online that trying to figure out what is right can be difficult, Copeland said. Even if the information in a video is accurate, for example, you might not understand how to apply it to your situation. Therefore, consulting with a professional may provide more personalized advice.
Choosing Where to Turn for Financial Advice
Financial advisors can be unaffordable for some lower-income individuals, or the minimum asset requirements might be too high. Another potential downside is that many people don’t know who to turn to, said Copeland. If you don’t have someone in your family who uses an advisor and makes a recommendation, it can be hard to find one you trust.
Fast Fact
A YouGov survey found that trustworthiness and cost are the two most important factors when choosing an advisor.
One solution could be to start on a smaller scale. You might first work with a financial coach, for instance. Employers are increasingly offering financial coaches as part of their financial well-being benefits, providing someone to help with more foundational issues, such as budgeting, Copeland said.
That could be particularly helpful for lower-income workers who want to get their finances in order before starting to invest and potentially consulting a financial advisor.
Another option is roboadvisors, which provide automation in building an investment portfolio based on how you answer questions about your risk tolerance and goals. Roboadvisors typically cost significantly less than human advisors.
That could help fill some gaps, such as providing investment support for those at lower asset levels, who may initially use roboadvisors and later work with a financial advisor on more niche areas, Copeland said. “And it would certainly help the younger people who are more reliant on doing everything on the internet.”
The Bottom Line
Ultimately, not everyone needs a full-service financial advisor, but they can potentially help you make better decisions and feel more confident with retirement planning or estate planning. If you’re not ready to work with an advisor consider other types of financial professionals or fintech tools that can provide information and assurance.
