Americans trust financial advisors more than family, friends and 'finfluencers'

Advisors top family, friends and 'finfluencers' as most trusted source for financial advice

July 28, 2023 1:24 PM

Most Americans say their personal financial planning efforts could benefit from the confidence boost that comes with having a financial advisor.

But the number of people who actually work with one is still eclipsed by the number of people who don't.

According to the 2023 Northwestern Mutual Planning & Progress Study, two-thirds of Americans (66%) believe their financial planning needs improvement, a 4 percentage-point increase from last year.

The study finds this to be especially true among younger adults as 79% of Gen Z and Millennial respondents agree with that statement.

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Tim Gerend, chief distribution officer at Northwestern Mutual, said one factor driving this could be the current economic landscape. Nearly 1 in 5 people say that recent economic uncertainty has led them to either begin working with a financial advisor or plan to work with one at a later date.

"Financial uncertainty is up in 2023, and the question for many Americans is what to do about it," Gerend said in a statement. "The good news is many are taking action to plan and tapping advisors for help in an increasingly complex financial environment so that they can reach their goals."

The study also provides a look at how some Americans consider the tips being dished out by "finfluencers" — social media celebrities who offer financial advice to their followers.

While not all finfluencers are malicious, experts warn that many of them spread misinformation, confuse investors or even push stocks that they're secretly paid to promote. Finfluencers were the focus of a recently issued risk advisory from the The North American Securities Administrators Association (NASAA), a coalition of financial regulators across the continent.

The advisory warns that finfluencers are not bound by the same regulations as financial advisors, and the rules that do apply to them aren't always enforced. That means there are few limits on what they can say and little reason for them to disclose who's paying them to say it.

Advisors top the trust charts

Americans say that financial advisors are the most trusted source of financial advice, outpacing spouses, family members, business news, friends and social media.

While Gen Z and millennials may spend a significant amount of time on social networks, the vast majority are not turning to those channels for trustworthy financial guidance, according to the study. Only 4% of millennial and 6% of Gen Z respondents listed influencers/social media as the most trusted source of financial advice.

Financial advisors were the most trusted source in all age groups except for Gen Z, in which family members took the top spot.

Across all age groups, 31% of respondents considered advisors the most trusted source for advice. Just 3% felt that way about finfluencers.

"FinTok and meme stocks inspired many young people to get excited about building wealth, but it's clear that they are turning to advisors for advice they can trust," Gerend said. "At Northwestern Mutual, the average age of our new clients is 32, and we see the enthusiasm these generations have for working with an advisor to create wealth and protect it from risks."

Old vs. new

The data finds people turn to advisors for their professional expertise and to help them maintain a long-term view that keeps them on track to achieve goals. Gen Z and millennials said they were more likely than other generations to turn to advisors for help aligning their finances with their values, saving time and keeping up to date on things like changes to the tax code.

When selecting an advisor to work with, respondents said they prioritize someone who understands their life stage priorities (54%) and who has a long track record of experience (51%). When looking across generations, Gen Z and Millennials place a higher premium on working with an advisor who is tech-forward and demographically similar to them.

"What we know is that people form long-term relationships with their advisors lasting 20, 30 or 40 years, and it's clear that younger generations are expecting empathy just as much as they're expecting financial expertise," Gerend said. "For someone to feel comfortable sharing their dreams and worries with an advisor, there needs to be a human connection rooted in trust and understanding, and that's something our industry should continue prioritizing."

The 2023 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual among 2,740 U.S. adults. The survey was conducted online between February 13 and March 2, 2023.

Financial advisors boost confidence

The research shows that people who work with an advisor have significantly higher levels of confidence across a range of areas, including being prepared for unplanned expenses, being able to retire when the time comes and achieving long-term financial security.

Gerend said when Americans ground their financial futures in custom-built plans with advisors instead of in their own gut feelings, the confidence boost can be "tremendous."

"Financial advisors can help people in so many ways they might not realize — managing debt, building and protecting wealth, estate planning and more."

Planning and risk

The study reveals a 50-50 split between how people approach financial planning in America. Half of U.S. adults say they are disciplined, with 20% identifying as highly disciplined planners and 30% as disciplined. The other half identify as undisciplined, with 36% saying their planning is informal and 15% saying they don't plan at all.

A majority (70%) of Americans say they have clarity on exactly how much they can spend now versus save for later. The number climbs to 83% for those who work with a financial advisor.

When it comes to risk, 63% of Americans say they're very or somewhat tolerant of financial risk in their investments, and comfort with risk goes up to 71% for people who work with advisors; 72% for those who consider themselves disciplined or highly disciplined planners; and 79% for high net worth individuals.

The study found that just over half (52%) of U.S. adults say they have a financial plan that factors for up and down economic cycles over time. That compares to 84% of high net worth individuals who say the same, and 79% for those who work with an advisor.