As individuals get closer to retirement, they tend to rely more heavily on financial advisors to guide their financial decisions, according to a recent report by Cerulli Associates.
It comes as no surprise that investors seek reassurance as they enter this new phase of life. Navigating retirement and ensuring sufficient income can be a complex task.
Cerulli’s report highlights a shift in the approach investors take towards retirement planning in the years leading up to their retirement.
Over five years before retirement, 27% of investors become heavily reliant on advisors, seeking their expertise and assistance. Another 34% are advice-seekers, exhibiting some characteristics of do-it-yourself investors but still looking for professional investment advice. The remaining investors fall into the category of either DIYers or those who prefer a set-it-and-forget-it approach, according to Cerulli.
However, as retirement approaches, many investors opt to delegate the intricate details of their financial matters to their trusted financial advisors.
Retirement Planning and the Role of Financial Advisors
In the final stretch towards retirement, the reliance on financial advisors becomes increasingly crucial for investors. According to a study by Cerulli, 46% of soon-to-be retirees heavily rely on advisors, while the number of individuals seeking advice plummets to just 9%. This trend continues even after retirement, with 55% of retirees relying on financial advisors compared to a mere 3% who actively seek advice.
As retirement approaches, investors tend to prioritize well-known brands when selecting an advisor. Cerulli’s research shows that investors’ preference for advisors affiliated with national firms increases from 39% to 45% upon retirement.
However, finding the right advisor remains a challenge for a significant portion of investors. About 25% of individuals within five years of retirement admit to struggling to find a suitable advisor. This figure drops to 15% for retirees who have already been enjoying their retirement for at least one year.
It comes as no surprise that investors, both in retirement and still working, consider ensuring a comfortable standard of living during retirement as their most important financial goal. Cerulli’s study highlights that pre-retirees are particularly concerned with improving household cash flow, while retirees prioritize preserving their current level of wealth.
Cerulli’s report is released at a time when a significant wave of baby boomers is transitioning into retirement. According to the U.S. Census Bureau, by 2030, all baby boomers will be at least 65 years old. This demographic shift emphasizes the growing importance of sound retirement planning and the pivotal role that financial advisors play in helping individuals achieve their retirement goals.