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With a new year arriving imminently, it’s an appropriate time for clients to set goals for 2025 and that includes financial goals. In fact, those should be atop or near the top of the list for many clients.
Data reveal that’s the case, but advisors need to be in-tune with exactly what clients want to accomplish, financially speaking, in the new year. Heading into 2025, many clients want to lower their debt burdens and that’s something for advisors to be aware because it debt-reduction strategies are in demand, can amount to a value-add service and can contribute to a practice’s holistic aspirations.
Advisors can play important roles in ameliorating the burden of consumer debt. While advisors aren’t supposed to be credit counselors in the strictest sense of that term, the stark reality is many clients – particularly those in younger demographics fall into one of the two following camps. They’re either not well-educated on what it takes to achieve a strong credit score or they are knowledgeable about that and want strategies for getting there and reducing debt.
Debt Reduction Top of Mind for Many Clients
A recent survey by Bankrate confirms the extent to which American want to pare debt in 2025. Twenty-one percent of respondents to the poll named reducing debt as their top financial goal for 2025 – the highest percentage in the survey. Those percentages vary from generation-to-generation, but advisors should note that the groups most intent on trimming obligations next year are Gen X and baby boomers.
“Carrying credit card debt is costly, but it’s become more common over the last few months. As of June 2024, at least half of Americans carry a credit card balance from month to month, according to Bankrate’s Credit Card Debt Survey. That’s up from 44 percent in January 2024, and the highest percentage since March 2020 (60 percent),” according to Bankrate.
It’s obvious why clients want to reduce debt. As Mark Hamrick, senior economic analyst at Bankrate, points out, the average interest rate on a credit is 20%. Said another way, the Federal Reserve is lowering interest rates, but benefits aren’t yet trickling down to consumers in terms of tangible savings consumer debt interest.
For a client that has a $10,000 credit card bill and is making just minimum payments per, a 20% interest rate implies a total tab of nearly $16,000 and a decade to erase that debt. So yes, it’s a great idea to erase that obligation and even better one to make it happen.
Financial Goals Are Viewed in Urgent Light
Something else for advisors to keep in mind is that for many clients, their financial goals are their top priorities for the new year and they want to make headway on those objectives sooner than later. Forty-three percent of those queried by Bankrate said their financial goals are something they want to start on as soon as 2025 starts.
“Thirty-five percent say it’s a medium-term issue, meaning they’ll address it once they’ve had some time to think and plan. Thirteen percent called their main financial goal a long-term issue and will address it after they’ve had an extended period to do research or find advice,” adds the research firm.
Bottom line: clients want to make progress on 2025 financial goals and they want to start fast. It could be a busy January for advisors.