Big Ad Spending Not Influencing Retirement Savings Behavior
Americans remain unprepared for retirement, even though the financial services industry spent $1.14 billion in 2011 advertising retirement planning products and services. To determine why the promotional messages are not changing behaviors, the Deloitte Center for Financial Services surveyed 4,500 consumers from a wide range of age and income groups. What they found were five barriers restricting Americans from taking a more disciplined approach.
Those barriers are:
- Conflicting Priorities. About 40% of those surveyed said other financial priorities (e.g., mortgage, student loans, etc.) interfere with their ability to save for retirement. Health care expenses are a bigger factor for older adults, with 41% of retired respondents saying that saving for medical expenses is a priority.
- A Failure to Communicate. Six out of 10 respondents said they have not discussed their retirement savings and income needs with any financial institution during the past two years. The lack of communication does have an income element, with the instances of being contacted by financial professionals rising for those with salaries in excess of $200,000 per year.
- A Lack of Product Awareness. Deloitte found that many individuals were not familiar with the savings products available to them. For instance, 60% don’t know anything about target date funds or are unsure how these funds work. Four out of 10 respondents don’t understand how annuities work.
- Mistrust in Financial Institutions and Intermediaries. Less than one in five respondents said they have a high degree of trust in any type of financial institution. Less than one in 10 thought the ads run by financial institutions were highly trustworthy.
- “Do It Myself” Mentality. Nearly 60% of respondents said they were more comfortable handling their retirement plan on their own, rather than consulting with a financial professional.
The report was written for the financial services industry, but we think it offers some lessons for individuals as well. The biggest issue is that many individuals are simply not taking the time to create a comprehensive financial plan and investigate the investment options available to them. Even if a plan is not fully executable, it creates a roadmap to help guide future spending, saving and investing behavior. Plus, such a plan can provide a framework for judging the suitability of various investment products.
Source: “Meeting the Retirement Challenge: New Approaches and Solutions for the Financial Services Industry,” Deloitte Center for Financial Services, 2013.