With surveys showing decent financial literacy but a lack of planning among Canadians, the need for financial advisors has become clear. However, a recent study suggests that simply focusing on well-laid plans isn’t enough.
A study of Americans conducted by New York Life has revealed that while Americans are more optimistic and more concentrated on their own financial planning than they were half a decade ago, they may not be planning far enough into the future, reports Financial Advisor IQ. Out of 1,863 American adults surveyed, 67% are planning to focus on reducing their debt – 10% more than the figure recorded in 2011. Furthermore, 61% are intent on saving more, compared to the previous survey’s finding of 50%.
However, the survey also found that Americans define “long-term” as only 4.4 years; true long-term plans, according to New York Life, should extend 10, 20, and 30 years into the future. The shortening of financial time horizons might also be reflected in the respondents’ financial goals, as 30% plan to increase their spending on eating out, vacations, and entertainment, compared to 15% who reported such plans in 2011.
Ideally, advisors should be able to intervene and extend their clients’ plans appropriately. But that’s unlikely to happen for Americans, as only 24% of survey respondents plan to consult a financial professional – though on the bright side, that’s an improvement over the 14% tallied in 2011.
Many more Americans are getting financial advice from less formal avenues, with 47% planning to rely on family and 42% on friends.
Early financial literacy urgently needed
Are Canadians right to be financially pessimistic?