Professional Documents
Culture Documents
Full Report
Polly Painter-Eggers
Distribution Research
860-298-3988
ppaintereggers@limra.com
300 Day Hill Road, Windsor, CT 06095-4761, U.S.A. P.O.Box 208, Hartford, CT 06141-0208, U.S.A.
Phone: 860-688-3358 • Fax: 860-298-9555 • Web: www.limra.com
©2007, LIMRA International, Inc.
This publication is a benefit of LIMRA International membership. No part may be shared with
other organizations or reproduced in any form without LIMRA’s written permission.
007511-0307-250-LRN0
A 2007 Report
This publication is a benefit of LIMRA International membership. No part may be shared with other
organizations or reproduced in any form without LIMRA’s written permission.
007511-0307-250-LRN0 Printed in U.S.A.
CONTENTS
Page
METHODOLOGY............................................................................................................. 5
Conclusion .................................................................................................................. 24
Page
Figure 1 — Among Couples Who Manages Finances ........................................................7
METHODOLOGY
LIMRA electronically surveyed more than 1,000 members of a national consumer panel
in order to gauge consumers’ financial literacy and their own assessments of their
financial preparedness for the future. All participants were at least 25 years of age with a
minimum household income of $75,000. Research shows that households with incomes
at this level or more are far more likely to rely on a financial advisor than those whose
household incomes are less than $75,000 per year. They are also more likely to be
presented with a myriad of solutions by financial services organizations. Data has been
weighted by gender, age, household income, level of education, and marital status.
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
With retirement looming for an estimated 75 million baby-boomers, the nation faces the daunting
task of planning for its financial future. Social security dangles by a tenuous thread as boomers
prepare for their twilight years. People are living longer; all-the-while health care costs are going up.
Health insurance and prescription drug costs are the two largest health care expenses for the average
household. The average household spent $374 for prescription drugs and $1,168 for health insurance
payments1. Add to the mix the increasing numbers of companies who are scaling back on pensions
and other retirement benefits and one can not help but wonder — how is this all going to work?
For consumers, the writing is on the wall. With fewer government resources to support the elderly in
their retirement years, people will be asked to bear more and more of the financial responsibility for
themselves whether they’re ready or not. Are they aware of the many choices they may have to face?
Do they have the knowledge to make those choices? In an effort to gauge the country’s level of
financial literacy, LIMRA asked upper and middle-income consumers how prepared they think they
are to address these challenges. Results show that, for most, financial planning is at best an
unpleasant chore often put off or too daunting, which often leads to inaction. So, are consumers
seeking professional advice? The answer is yes — and no.
The complexities of the economic future pose a different kind of challenge to financial planners.
Finding innovative and efficient ways of attracting and maintaining clients is becoming even
more elusive as the complexities grow. While advisors may be able to identify potential clients,
the strategies they employ to secure those relationships will ultimately determine how successful
they are.
_____
1
Who’s Buying Health Care, New Strategist Publications, Inc., 2005
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 1 —
Among Couples Who Manages Finances
Wife,
31%
As a couple,
39%
Husband,
30%
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
• People of all ages regardless of marital status are most worried about
three issues:
• Their ability to pay for hospital and medical coverage
• Young Couples and Young Households believe that having enough savings in
case of job loss was of utmost importance to them. This may be due to their lack of experience
in the job market. They may see themselves as a target for any potential lay-offs or downsizing
situations. It’s also possible they may not yet have built up enough savings to fall back on. Not
surprisingly, Young Households also reported that funding their children’s’ college education
was a critical issue for them.
• Singles with No Children and Mature Couples are most concerned about
having enough money to live on throughout their life spans. Singles without children do not
typically have an additional income source to rely on if they are suddenly unable to work due to
illness or an accident. The older group, however, may be uneasy about the rate at which their
financial resources are dwindling while their life expectancy remains uncertain.
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 2 —
What issues are most important to you?
Top three objectives per life stage
1 2 3 4 5 6 7
Paying my or my spouse/
partner’s burial expenses
*These questions were asked only of consumers under age 65 White = Least Important Range Purple = Most Important Range
Life stages:
1 — Not married with no children under 18 living in household
2 — Not married with 1 or more children under 18 living in household
3 — Married, under age 35 with no children under 18 living in household
4 — Married with 1 or more children under 18 living in household
5 — Married, aged 35 to 55 with no children under 18 living in household
6 — Married, age 56 and older with no children under 18 living in household
7 — All Stages
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
With mounting economic and environmental challenges facing consumers today, the need for people
to understand the reality of their financial futures is greater than ever. Do people believe they are
knowledgeable about the financial options they have in order to prepare for a lifetime of financial
security?
In our study, we didn’t go as far as to test their knowledge, but we did ask how knowledgeable
people think they are when it comes to making financial decisions. We also asked what steps they
have taken to prepare themselves for their future financial stability. In general, there are not many
financial topics that people feel “very knowledgeable” about. Whether it’s managing savings and
investments or purchasing life and long-term care insurance, it appears that consumers still have
some things to learn (See Figure 3).
Saving. Just over half (54 percent) feel they are “very knowledgeable” about saving. Among
this group, wealthier and more elderly people believe they’re even smarter about saving.
Filing income taxes. Only 45 percent feel they are very knowledgeable about filing taxes.
And while 43 percent say they are somewhat knowledgeable, that leaves 12 percent of the
population feeling very uneasy every April 15th. The confidence some people have about
taxes may be due in part to the popularity and availability of software packages for
consumers to manage their own tax returns.
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 3 —
Consumers Knowledge of Financial Objectives
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 4 —
Steps Consumers are Taking
Have done this Have considered but not done it Have not thought about it
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
While many consumers say they have not taken any steps themselves to prepare for their future
financial stability, others have turned to outside advice. Sixty-one percent of consumers earning
$75K or more seek professional financial advice on a regular basis. Not surprisingly, of those
seekers, many more have either seriously considered taking action or actually taken steps necessary
to prepare for their future financial security. Whether or not they are satisfied with the course of their
decision-making is another matter.
Figure 5 —
Consumers* Who Seek Regular Financial Advice
Seekers,
61%
Non-seekers,
39%
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
• Lawyers are the advisor of choice by people over the age of 65 as well as people in the
highest income brackets ($150K or more).
• Investment Managers and Stockbrokers are each utilized by only 8 percent
of consumers, most frequently by the highest income earners of $200K or more.
• Only 8 percent of middle class consumers rely on their Employers the most for financial
advice, mainly by people under the age of 55.
Figure 6 —
Financial Advisors Used on a Regular Basis
Accountant 36%
Lawyer 13%
Stockbroker 8%
Employer 8%
Other 2%
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
17
Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 7 —
How Primary Advisors Help*
Not to minimize the impact of a financial windfall or a death in the family, but consumers who would
seek advice only under these circumstances obviously don’t see the benefits an advisor could have on
a daily basis. These consumers don’t seem to appreciate the small ways in which their income stream
could be managed more efficiently over the long-term. For whatever reason, they are fixed in short-
term thinking.
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 8 —
When Consumers Plan to Call Advisors
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 9 —
Financial Triggers: Differences between Men and Women
M ale Female
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 10 —
Who Consumers Plan to Seek Out
60%
Financial planner or advisor
51%
50% Lawyer
45%
Accountant
40% Investment manager
34%
Life insurance agent/broker
30%
Banker/loan officer
20% 17% Other
Mutual fund broker
10% 8% Employer
6%
3% 3% 2%
1% Stockbroker
0%
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
_____
2
Every Excuse in the Book, LIMRA International, 2005.
22
Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
Figure 11 —
Matching Literacy Levels with Needs
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
CONCLUSION
Preparing for the future financial needs of the population has become a great challenge facing
consumers and financial service providers alike. Consumers feel uneasy about their situations
regardless of whether or not they’ve prepared themselves. Financial advisors should take note and
heed the call to action. The key to success will be matching needs with the particular financial
services that best meet those needs. Understanding whether or not individual consumers require
educating, encouragement to act, or specific advice should be the driving force behind any plan to
target new or existing markets. Clearly, consumers and advisors both have some responsibility in
achieving the overall goal: a financially prepared and literate population that can approach the future
with confidence.
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
RELATED LINKS
LIMRA
Every Excuse in the Book (2006)
Last year, LIMRA identified the potential for new life sales among 48 million U.S. households who
say they don't have enough life insurance. New insights into why they don't buy the coverage they
say they need and what it will take to convert them into buyers is the focus of LIMRA's latest study
of the underinsured life market. This report highlights what consumers desire when going through the
life insurance buying process, and points out the changes the industry will need to make if they want
to reach these potential customers.
http://www.limra.com/members/abPdf/5370.pdf
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Another Inconvenient Truth: Are Consumers Prepared for Their Financial Futures?
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Another Inconvenient Truth:
Are Consumers Prepared for Their Financial Futures?
Full Report
Polly Painter-Eggers
Distribution Research
860-298-3988
ppaintereggers@limra.com
300 Day Hill Road, Windsor, CT 06095-4761, U.S.A. P.O.Box 208, Hartford, CT 06141-0208, U.S.A.
Phone: 860-688-3358 • Fax: 860-298-9555 • Web: www.limra.com
©2007, LIMRA International, Inc.
This publication is a benefit of LIMRA International membership. No part may be shared with
other organizations or reproduced in any form without LIMRA’s written permission.
007511-0307-250-LRN0