Data and Research December 12, 2017

Fewer People Rely on Employer as a Source of Investment Advice

Investors are more likely to blend live and digital sources of advice, a survey found.

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“Employer” is the eighth most important source of investment advice and information in 2017, cited as a primary, usual or occasional source by 46% of households nationally, according to a report from Hearts & Wallets. Employer is the primary source for only 27% of households.

Employer is the 10th source for frequency of sources, trailing the leaders of myself, partner/spouse, media (newspapers/radio/TV/radio), family, online, friends, financial professionals and other sources, the survey found.

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Instead, the leading source of investment advice and information is “myself,” at 91%, increasing from 86% in 2013. “Spouse/partner” comes in second at 85%, up from 75% in 2013. Financial professionals come in third at 71%, up from 64% in 2013.

All types of financial professionals as a group grew as a source of information and advice overall, increasing seven percentage points from in 2013. Although use of paid investment professionals declined by one percentage point at the national level since 2013, other types of financial professionals, mostly unpaid, grew by more than nine percentage points.

Investors are increasing use of all sources of information and advice in 2017, and at the same time, are more likely to blend live and digital sources of advice. Using this emerging definition of “hybrid” investors, 41% of households use both digital advice as well as live financial professionals.

The biggest blenders of digital and live advice are the more affluent and younger consumers. Blenders of digital and live advice include more than two-thirds (68%) of investors ages 35 to 44 with investable assets between $100,000 and $250,000 and 85% of investors younger than 35 who have more than $1 million in assets. In all, more than 75% of consumers younger than 45 with assets of more than $250,000 meet this “hybrid” definition.

According to the survey, more than half of U.S. households now uses online sources of investment information and advice. Computer and mobile growth as a source continues among younger investors (ages 21 to 39) and pre-retirees. Mobile use as a source of information and advice has tripled over the last six years at the national level. Nearly two thirds (60%) of investors ages 21 to 27 now use mobile, and investors ages 40 to 52 are warming to mobile, at 31%.

The top three online activities nationally for investors are checking their accounts, using planning calculators and tools, and visiting finance portals. For mobile, the top two activities are the same, but “using social media” and “watching videos and podcasts” tie for No. 3. The biggest generational difference is that younger investors tend to be more interested in social media, watching videos and downloading podcasts. Almost half of investors ages 21 to 39 now use social media for investing information.

Information about how to purchase the report, Advice & Technology: Rise of Mobile and New Thinking on the “Hybrid Investor,” is available here.

Data and Research December 12, 2017

Investors Agree Guaranteed Income in Retirement Is Important

However, there is confusion about how to get this additional income stream.

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According to the Wells Fargo/Gallup Investor and Retirement Optimism Index, asset owners are feeling about as optimistic today as they did back in September 2000, when the index set its as-yet-unbroken record high of +147.

The strong optimism for the third quarter stands despite real concern, only recently abated, that Congressional tax reform efforts might reduce or even eliminate tax incentives and favorable deferral rules for employer-sponsored retirement plans. According to the index results, three-quarters of non-retired investors in the survey have a 401(k) plan, and more than half (57%) say the most valued feature of their plan is the “match contribution from their employer.” The next most valued feature is the tax deferral on the money they contribute, which was noted by 33% of respondents.

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“The 401(k) plan has evolved into the greatest savings and investment vehicle that Americans have today to steadily build a retirement nest egg,” says Fredrik Axsater, executive vice president and head of strategic business segments at Wells Fargo Asset Management. “Pre-tax savings has a direct impact on the level of savings that people achieve, and we have to recognize this as the country contemplates changes in tax policy.”

Forty-six percent say they would “save less” or “stop saving” in their 401(k) if the tax deferred status of their plan was taken away.

Confusion abounds over retirement income

One key finding from the index shows nearly all non-retired investors (98%) “strongly agree” or “somewhat agree” that “it is important to have a guaranteed income stream in retirement, in addition to Social Security,” and yet, according to Axsater, there is confusion about how to get this additional income stream.

“Six in 10 either strongly agree or somewhat agree that they want a guaranteed monthly income stream that lasts as long as they need it, even if that means giving up access to some of their money,” he says. “But at the same time, 75% of non-retired investors either strongly agree or somewhat agree that they want the freedom to spend their money as they want in retirement, even if that means they may run out of money too soon.”

Investors also are unsure about what products are available to provide them with a guaranteed income throughout retirement. In addition, they are unsure how much money they would need to structure various levels of income for various amounts of time.

“Setting a retirement savings goal—even if it’s an estimate—is a critical step in the process of managing one’s retirement outcome, but it’s hard to do,” Axsater notes. “Further, it becomes even harder to try to estimate what one will harvest from savings each year of living in retirement. This is where our industry must come up with solutions that allow people to envision their savings needs and what that translates to in terms of annual draw down in retirement.”

Interest grows in social impact investing

Wells Fargo and Gallup researchers asked investors about their views on “social impact investing,” which was defined for respondents as “choosing investments based on the effect they have on things like the environment, human rights, diversity and other social values, in addition to investment returns.”

Women express more interest in investing in social impact investments, with 39% saying they are “very interested” or “somewhat interested,” as compared with 26% of male investors. The data shows younger investors appear more interested in this type of investing, with 39% of investors aged 18 to 49, “very interested” or “somewhat interested,” compared with 29% of investors age 50 and older.

Overall, 44% of non-retired investors with a 401(k) say they would “definitely” or “probably” put money in social impact investments if they had the option in their plan. Moreover, 34% of non-retired investors with a 401(k) say that including social impact investments as an option in a work-place retirement plan would make them feel “more positively” toward their employer. Of those non-retired investors who would feel more favorably about their employer, 53% are women and 47% are men.

In the Wells Fargo/Gallup survey, investors were asked to rate their interest in each of three specific social impact themes. Seventy-eight percent of investors say they are “very interested” or “somewhat interested” in protecting the environment, 76% are “very interested” or “somewhat interested” in doing social good—such as promoting diversity and improving education—and 74% are “very interested” or “somewhat interested” in focusing on responsible corporate governance, including “ethics” and “behaviors.”

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