Sleep Easy Investing

New Survey Offers Snapshot of Consumers’ Investment Behaviors; Only 17% Can Afford to Invest More Than $ 250 Per Month, Survey Says

Falls Church, VA (Vocus) December 19, 2010

A new survey commissioned by the National Association of Insurance and Financial Advisors examines consumer attitudes toward financial advising, and finds that while a variety of models for providing advice is necessary to serve the public, the need for affordable services is critical for those who say they have limited financial knowledge and funds in which to invest.

According to the survey of 1,008 U.S. adults conducted by Opinion Research Corporation on behalf of LIMRA International, 86 percent of consumers said their level of financial knowledge is only “fair” or less than fair. When asked how much they could afford to invest each month with a financial advisor, nearly half (47 percent) of consumers say they could invest less than $ 100 a month, or nothing at all.

According to the survey:

30 percent say they have no extra funds to put toward a monthly investment with a financial advisor
17 percent say they could afford to invest less than $ 100 a month
17 percent could invest between $ 100 and $ 250
17 percent could afford to invest $ 250 or more a month.

Consumers with middle-market household incomes of $ 50,000-$ 99,000 a year said they could afford to invest the following each month:

26 percent could invest nothing
15 percent could invest less than $ 100 a month
23 percent could invest between $ 100 and $ 250
17 percent could invest $ 250 or more a month.

The survey also found that of those consumers who say they have worked with a financial advisor:

18 percent say they have nothing invested
33 percent have less than $ 50,000 invested
30 percent have $ 50,000-$ 249,000 invested
19 percent have more than $ 250,000 invested with an advisor.

“There are several models of financial advice in the marketplace, and consumers need to find the right service that fits within their financial goals,” Headley said. “Most NAIFA members are community-based small business owners who serve clients in the lower- to middle-market range. Some clients can invest up to $ 50 a month; others have more than $ 250 a month. Regardless of the amount, NAIFA members are proud to provide sound advice and affordable services to help our clients plan and achieve financial security for their families and businesses.”

Headley points to a 2008 RAND study that found many registered investment advisors require a substantial minimum balance and charge consumers high fees for financial advice, making their services prohibitive to many middle-market Americans.

The survey comes at a time when financial regulators are examining investor protections under both a fiduciary standard of care (applicable to registered investment advisors) and a suitability standard (applicable to many NAIFA members that are broker-dealers and registered representatives). NAIFA members believe that if a fiduciary standard of care is imposed under Wall Street Reform, then their compliance costs would go up and the economics of staying in business could force them to discontinue service to a significant portion of consumers who say they have limited amounts in which to invest.

The consumer survey was conducted in conjunction with a survey of NAIFA members, also conducted by LIMRA, which establishes a link between NAIFA members and their core client base: middle market consumers.

For additional resources, visit http://www.naifa.org/ServingMainStreetInvestors/.

To find a NAIFA member in your area, consumers may visit: http://www.naifa.org/consumer/advisor.cfm

About the Surveys

LIMRA conducted a Web-based survey of active NAIFA members during the time period of Oct. 7-20, 2010. Results are based on responses from 3,372 NAIFA members with a margin of error of plus or minus less than two percentage points.

LIMRA facilitated an Internet survey by Opinion Research Corporation conducted Oct. 11-13, 2010. Results are based on responses from 1,008 U.S. adults age 18 or older, representative by gender, age, region and race. The margin of error is plus or minus three percentage pointes.

About NAIFA: NAIFA comprises more than 600 state and local associations representing the interests of approximately 200,000 agents and their associates nationwide. NAIFA members focus their practices on one or more of the following: life insurance and annuities, health insurance and employee benefits, multiline, and financial advising and investments. The Association’s mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of its members.

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