NEW YORK—A new study found half of consumers believe financial advisors are more expensive than they are, but almost all who use one say the expense is worth it.
In a survey conducted by MagnifyMoney, 42% of Americans think financial advisors are only for the wealthy, even as 95% of those with one say they’re worth the money.
MagnifyMoney said it surveyed 1,500 Americans on everything from why they have (or don’t have) a financial advisor to whether they’d consider getting a financial advisor in the future, to whether people think they could get the same information on Google.
The Key Findings
- 30% of consumers have a paid financial advisor. Those most likely to pay for an advisor include consumers with incomes of $100,000 or more (55%), college graduates (41%) and men (35%), MagnifyMoney said.
- 60% of those with a financial advisor hired one after a specific life event. For example, more than one-in-five Gen Zers with a financial advisor hired one after a death in the family and/or receiving an inheritance, while 22% of millennials with a financial advisor got one because of a marriage or divorce, the survey found.
- 95% of those with a financial advisor think it’s worth the money, with many (61%) saying they pay less than $3,000 annually for related financial services.
- “Fair fees” are most important to consumers looking for a financial advisor, followed by being local and showing proven returns. Additionally, more than 10% of consumers 40 and younger say diversity is important to them (about double the percentage of consumers older than 40 who say the same), MagnifyMoney said.
- Many misconceptions about financial advisors’ services exist. Forty-two percent think financial advisors are only for wealthy people, 38% think the same information can be found online and 25% think you don’t need a financial advisor until you’re middle-aged, according to MagnifyMoney.
- 45% of those who don’t have a paid financial advisor — and 50% of all consumers — think they typically cost much more than they do. Fee-only advisors typically charge between 0.5% and 1.25% of the assets they manage, but these respondents believe the typical cost is between 5% and 15% (or more) of assets, the company found.
- At the end of the day, 82% would rather have a financial advisor manage their investments than a robo-advisor. That said, 29% of Gen Zers would prefer using a robo-advisor, more than any other generation.
Financial Advisors
The survey found 30% of Americans use a financial advisor. More specifically:
- Men (35%) are more likely than women (25%) to have a paid financial advisor
- Baby boomers (36%) and Millennials (31%) are more likely to have one than Gen Zers (29%) and Gen Xers (24%)
Why use an advisor? The survey found:
- For investment management (60%).
- Achieving financial goals (38%)
- Getting general financial advice (36%)
- Creating a comprehensive financial plan (30%)
Who Uses Advisors?
Who uses financial advisors by generation?
- 34% of Millennials
- 24% of Gen Xers
- 10% of Baby Boomers
According to MagnifyMoney, for the most part those with a financial advisor said they hired one after a specific life event (60%). Getting married or divorced (14%) or receiving an inheritance or other large sum of money (11%) were among the most common responses. Another 12% cited reaching retirement age, but that can be a costly wait in the long run, the company reported.
Trends Uncovered
MagnifyMoney said it uncovered several other “interesting trends,” including:
- 22% of Gen Zers with a financial advisor hired one after a death in the family and/or receiving an inheritance
- 22% of Millennials with a financial advisor got one after getting married or divorced, and 19% after the birth of a child
- 23% of Baby Boomers with a financial advisor hired one when they reached retirement age