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Updated on Monday, March 22, 2021
Life changes, and often that means finances change, too. A financial advisor can be a valuable guide during these times, clarifying the financial aspects of buying a house, retiring and more. But 42% of Americans think financial advisors are only for the wealthy, even as 95% of those with one say they’re worth the money.
We surveyed more than 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. Here’s what they said.
- Key findings
- Financial advisors: Who has them, why them have them and what they pay them
- Those without financial advisors weigh in on why — and what could change their minds
- Many misconceptions exist about financial advisors’ services
- 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%).
- 60% of those with a financial advisor hired one after a specific life event. For example, more than 1 in 5 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.
- 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).
- 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.
- 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.
- 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: Who has them, why them have them and what they pay them
A paid financial advisor isn’t something the average person has in their corner, with just 30% of respondents saying they have one.
When you look at the demographics:
- 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%)
Once we looked into the who, we asked about the why. For those who have a financial advisor, the most common reason cited was investment management (60%).
Other common reasons included:
- Achieving financial goals (38%)
- Getting general financial advice (36%)
- Creating a comprehensive financial plan (30%)
Millennials, Gen Xers and baby boomers cited investment management as the main reason why, while Gen Zers cited tax planning. In fact, 46% of Gen Zers with a financial advisor get help with tax planning, versus:
- 34% of millennials
- 24% of Gen Xers
- 10% of baby boomers
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.
Smart times to seek professional financial advice, she said, include when you’re approaching a decision like buying a house or a major life event like getting married.
“Such events can trigger complex financial issues, and it can be beneficial to have a pro help you navigate them,” she added.
Some interesting trends emerged around this, 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
Again, delaying getting a financial advisor can be a bad move in the long term, especially for those who wait until retirement to start thinking about it. But for those who are interested in getting started, it’s important to know that it may be less expensive than many assume. Of those with a financial advisor, more than 6 in 10 pay less than $3,000 annually for those services.
On a positive note, 95% of those with a financial advisor think it’s worth the money. So for those who can afford one — and are nearing an important financial decision — it’s a smart financial move.
Those without financial advisors weigh in on why — and what could change their minds
To get a more complete picture of public perceptions around financial advisors, we also looked at those who didn’t have one.
Of this group, 57% said they prefer to manage their money themselves, while 33% believe it’s too expensive and 25% don’t think they have enough invested assets.
We also asked what factors might be important should those in this group opt to get a financial advisor. Unsurprisingly, a lot of it came down to money. In fact, 58% said fair fees would be the most important quality they would look for were they to hire a professional, followed by being local to their area and showing a history of proven returns.
Of note, 12% of millennials and 11% of Gen Zers cited that diversity was important to them, versus 6% of Gen Xers and 4% of baby boomers.
All in all, most of those who didn’t have a financial advisor weren’t opposed to it. In fact, 78% of those without one would consider hiring one at some point. But earnings and assets played a large role in this hypothetical situation. Namely, 28% said they’d hire a financial advisor if they start earning more than $100,000, compared with 24% if they receive a large inheritance and 23% if they have more than $500,000 in investable assets.
Many misconceptions exist about financial advisors’ services
Most Americans don’t have a paid financial advisor, and it appears that could have led to misconceptions around the services a financial advisor could provide and when it’s a good idea to get one.
For example, 42% of those surveyed think financial advisors are only for wealthy people. This was more prevalent among women (48%) than men (35%).
Another interesting aspect was timing, as 25% of respondents said they think you don’t need a financial advisor until you’re middle-aged. Unsurprisingly, this was more common with younger generations. In fact, 44% of Gen Zers thought this, compared with:
- 32% of millennials
- 19% of Gen Xers
- 14% of baby boomers
In the same vein, the cost of financial advisors was another point of misunderstanding. In fact, 45% of those who don’t have a paid financial advisor — and 50% of consumers in general — think they typically cost much more than they do. For context, fee-only advisors typically charge between 0.5% and 1.25% of the assets they manage.
Ultimately, it seems that most people (whether they have a financial advisor or not) place value on the ability to have a real person managing their finances.
Our survey found that 82% of respondents would rather have a financial advisor manage their investments than a robo-advisor.
The main differences came from Gen Z (29% said they’d prefer a robo-advisor, more than any other generation) and those making less than $35,000 (a higher proportion said they preferred a robo-advisor compared with higher earning brackets).
Lastly, while most people think that Google isn’t a sufficient replacement for information a financial advisor could provide, a significant 38% did agree with that statement. This idea is also more prevalent in younger demographics: Nearly 50% of those 40 and younger believe this.
However, it’s important to note that a financial advisor’s role isn’t always as simple as some would believe, and depending on the complexity of your finances, having an expert in your corner can be valuable.
MagnifyMoney commissioned Qualtrics to field an online survey of 1,552 Americans, conducted Feb. 11-16, 2021. The survey was administered using a non-probability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.
We defined generations as the following ages in 2021:
- Generation Z: 18 to 24
- Millennial: 25 to 40
- Generation X: 41 to 55
- Baby boomer: 56 to 75
While the survey also included consumers from the silent generation (defined as those 76 and older), the sample size was too small to include findings related to that group in the generational breakdowns.