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Experienced advisors there are at least two clear truths held by clients and these truths are essentially universal across age, gender and racial lines.
Clients want to feel wealth and they want security. Advisors also know that how clients perceive wealth and security often varies from one to the next. That’s not a bad, particularly not when there’s an evolving view of wealth – one that’s expanding well-beyond bottom-line financial concepts.
Regarding security, that too can take on many forms. However, there is some uniformity here. Many clients and those on the prospect list view financial security as being enhanced by more money, namely in the form of higher salaries.
Obviously, advisors can’t control how much their clients’ employers pay them. Where advisors can add value and make important contributions is talking with clients, formulating solid plans to help them reach their objectives and perhaps helping them realize they might need as much as they thought they did to enjoy life and feel secure.
Why It Matters
The paragraph above is vital for a simple reason: Many clients believe they need significant resources (or raises) to feel secure and be wealthy.
“Americans feel they’d need to earn approximately $233,000 a year on average to be secure or comfortable with their finances,” notes Bankrate.com. “To be rich and achieve financial freedom, Americans say they’d need to make about two times more: roughly $483,000 on average, according to the poll. Both numbers are significantly larger than the average earnings full-time, year-round workers made in 2021 ($75,203), according to Census Bureau data.”
The thing about making $233,000 per year is it’s, well, difficult. It’s more than triple the median U.S. salary and it’s rare. Less than 7% of U.S. households make at least $200,000 annually.
Add to that, macroeconomic factors, be they inflation, surging college costs, soaring real estate prices or rising state and local taxes, are hindering clients from feeling secure and, in their eyes, reaching financial freedom.
“More than 3 in 5 financially insecure Americans (or 63 percent) say high inflation is keeping them from being financially comfortable or secure, along with 48 percent who blamed the economic environment more broadly and 36 percent who pointed to rising interest rates,” adds Bankrate.
Obviously, can’t control the whims of the Federal Reserve, fluctuations in the residential real estate market and the refusal of colleges to be more affordable. However, advisors do play crucial roles in client outcomes, meaning they play pivotal parts in helping clients get to financial security. Data confirm that’s a good place to be.
“Most who are financially insecure have hope for the future. More than 2 in 5 Americans (or 46 percent) say they expect to achieve complete financial security someday,” according to the Bankrate survey.
Advisors May Get An Assist
As noted above, macroeconomic factors are playing a big role in clients’ concerns and those concerns are well-founded. By some estimates, a mortgage that just a few years cost $2,000 a month is now closer to $3,600 thanks to rising interest rates. Data indicate the number of cars on the road with $1,000-plus monthly payments is soaring.
“Factors related to the U.S. economy are overwhelmingly what’s holding back Americans’ finances, Bankrate’s survey finds. More than 3 in 5 financially insecure Americans (or 63 percent) point to high inflation, nearly half (48 percent) blame the economic environment more broadly and 36 percent point to rising interest rates as what’s keeping them from feeling financially secure,” concludes the research firm.
For advisors and clients alike, the good news is that these scenarios won’t last into perpetuity. College costs are another ballgame, but the day will come when interest rates decline. Combine that with a solid plan in advance of that happening and advisors can get clients to a place where there feeling better about their financial outlooks even if they don’t get a big raise at work.
Related: Advisor Interest in Income Is Rising