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Advice and Trust

A 2013 EBRI analysis found that the savings targets set by participants in the lowest income quartile who had sought the input of a financial advisor were associated with a lower risk of running short of money in retirement by anywhere from 9 to nearly 13 percentage points (depending on family status and gender), EBRI’s Nevin Adams writes in his column in the most recent issue of NAPA Net the Magazine.

Put another way, Adams notes, those who worked with an advisor set targets that were more likely to provide sufficient retirement income in retirement if they did, in fact, accumulate the amount they said would be required.

Unfortunately, only about one-fourth of the sample used an online calculator or sought professional investment advice, while nearly half of them merely “guessed” at those retirement savings targets. Why do so many reject advice, in whole or in part? As it turns out, the reasons most often offered for not following all of the advice include:

• not trusting the advice (33% of workers and 48% of retirees)
• not being able to afford it (21% of workers and 12% of retirees)
• having their own ideas or other plans or goals (18% of workers and 28% of retirees)
• circumstances changing so the advice was no longer applicable (13% of workers and 3% of retirees)
• getting better advice somewhere else (6% of workers and 5% of retirees)

Clearly, then, trust is an issue — and perhaps the most important one — when it comes to accepting and acting on an advisor’s recommendation, Adams notes. For advisors who hope to help participants make the best of their retirement savings preparations, this may mean that being positioned to offer advice through the plan may turn out to be less of a challenge than getting participants to take it.

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