Consumers are gearing up for a deep recession, turning to alternative sources for financial advice

Financial Advisors


New research from the National Retirement Institute shows that consumers fear the worst. 68% expect a recession within the next six months, and nearly 80% of those who do expect a severe recession. In fact, about two-thirds of respondents (62%) believe the recession will be as bad or worse than the Great Recession he had in 2007 from 2007.

As a result, consumer sentiment about the economy and their financial strategy has deteriorated beyond 2022. Only 16% of consumers rate the current U.S. economy as good or excellent, down eight points from September 2022. About 10 out of 4 (39%) gave their own personal finances a positive rating, down another 8 points from September 2022.

When it comes to managing personal finances, consumers are most concerned about inflation or rising costs of living (59%), rent or housing costs (34%), and lack of savings for unexpected or emergency expenses (32%). %), debt management. (31%); medical expenses (28%); retirement prospects (18%);

“It’s not surprising that people feel insecure,” he said. Christy Martin Rodriguez, leader of the National Retirement Institute. “It is important for advisors and financial professionals to understand what their clients are feeling right now as a first step to keep them focused on long-term financial planning.”

People need help keeping their course
Some consumers are making decisions that could adversely affect their long-term financial strategy in an attempt to offset inflation. More than a third (37%) have increased their reliance on credit cards or are considering doing so, and 24% have reduced or are considering reducing their retirement plan contributions. and 21% have or are considering new loans. Nearly 6 of her 10 (57%) consumers used savings to pay for everyday expenses in the past 12 months. This is even higher for Gen Z and Millennial consumers, at 64% and 66% respectively.

In the event of a recession, consumers are most concerned about their ability to save in general (58%), their ability to save for retirement (52%), the declining value of retirement accounts (52%), and whether or not you can retire. time (42%).

Investors are turning to alternative sources for financial advice
Despite their fears and concerns about their personal finances, most consumers, especially younger consumers, turn to untested sources for help. Seven in 10 (70%) of survey respondents do not use financial advisors, citing the following reasons: Too expensive (46%), Not enough assets (37%), don’t know who to turn to (22%), can handle on their own without needing advice (21%), don’t trust the financial services industry (16%), or are too busy (11%) ).

Instead of professional help, they turn to other sources of information, including friends and family (48% Gen Pop, 66% Gen Z). Online resources (26% Gen Pop, 34% Millennials), prayer (20% Gen Pop), social media (11% Gen Pop, 22% Gen Z).

Notably, about one-third (31%) of respondents feel that ChatGPT will provide better financial advice than human advisors in the next five years. This percentage is higher for younger consumers, with 37% for Gen Z and 43% for millennials.

“In moments like the one we are experiencing today, advisors and financial professionals have a tremendous opportunity to build deeper and more trusting relationships with their clients,” Rodriguez said. “When the financial news cycle looks so daunting, consumers can have a real temptation to back off or capitulate. The first step for advisors is to listen with empathy. It’s about understanding where your clients are coming from, so you’ll be set up for a more collaborative conversation about steps to keep your plans on track.”

Rodriguez offers 5 tips to help advisors and financial professionals ease their clients’ financial worries and build trust

  1. Listen and empathize: Reach out to your clients today and engage in conversations that understand their concerns and fears. Listen to them and give them space to share their feelings.
  2. Reveal the client’s source of information. If they are considering a hasty decision, ask questions such as “Who are you listening to?” and “What are they saying?” Identify the factors that are influencing their way of thinking.
  3. Discuss the best way forward. Ask what course of action they are considering, what alternative options are available, and work together to determine the best course of action for their situation and goals.
  4. Check your risk tolerance and current asset allocation strategy: Ask what’s new in their lives, if their financial goals or circumstances have changed, and if their current financial strategy is working.
  5. strengthen the plan: Emphasize to clients the tangible and emotional benefits of a financial plan and the importance of sticking to it during difficult times. A simple history lesson can help you visualize the eventual economic recovery that occurs after a recession.

For additional insights on this survey data, please visit Full findings.

methodology
Nationwide partnered with Edelman Data & Intelligence to conduct a 15-minute online survey of a nationally representative sample of 2,000 adult consumers from March 30 to April 13, 2023. As a member in good standing with the Insights Association and ESOMAR Edelman Data, Intelligence conducts all research in accordance with local, national and international law, in line with all market research standards and guidelines.

Economic and market forecasts reflect our views as of the date of this report and are subject to change without notice. These predictions show a wide range of possible outcomes. They are subject to a high level of uncertainty and do not reflect actual performance. We have obtained some information from sources we believe to be reliable, but we do not guarantee its accuracy, completeness or fairness.

Nationwide, Nationwide N and Eagle, Nationwide is Your Friend are service marks of Nationwide Mutual Insurance Company. © 2023 Nationwide.

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