More than one-third of Americans say they manage their personal investments on their own. And given that sizable percentage, a larger percentage of Americans are worried about a variety of economic issues affecting their finances, including high gas prices, inflation and saving for retirement, according to a survey released this week from Fidelity's wealth planning software division eMoney Advisor.
According to eMoney Advisor's Investor Trend Survey, 34% of Americans ages 18 and older said they manage all of their own investments; however, 38% say they rely on their financial advisor to manage their entire portfolio. Twenty-three percent incorporate a hybrid model – working with a financial advisor and managing some of their own investments simultaneously.
The eMoney AdvisorInvestor Trend Survey was comprised of a nationally representative sample of 2,000 Americans ages 18 and older and was fielded from December 15 to December 23, 2021.
The survey's release comes on the same day the Labor Department announced that inflation soared over the past year, the highest rate in four decades. According to data from the US Bureau of Labor Statistics, consumer prices jumped 7.5% in January, versus the same period the year before, further solidifying anxiety among many Americans who live paycheck to paycheck.
Although 40% of Americans surveyed said inflation was their biggest concern for 2022, it was edged out by gas prices and paying bills, at 43% and 42%, respectively. Thirty-three percent of respondents cited retirement savings as their top concern, and 32% placed taxes at the top of their financial concerns. EMoney says that the wide array of financial concerns for the year ahead suggests the need for more credible financial planning, guidance and education.
Where is that guidance coming from today? Thirty percent of respondents say they rely on friends and family for money guidance, while 27% rely on their bank or credit union, 25% go to the internet (including Googling for advice, social media posts and message boards like Reddit), and 20% rely on their employer for advice.
Unfortunately, the quality of that advice can be inconsistent, or worse, incorrect. "Americans are craving meaningful and responsible financial advice," says Celeste Revelli, CFP, director of financial planning at eMoney. "With endless access to information available online, it's difficult to identify what's sound financial advice and what isn't. If you don't have a financial advisor or planner, turning to your bank or credit union is a smart decision," Revelli says, adding that more people are also turning to their employer for both financial guidance and resources to help them make informed financial decisions.
The fact that 34% of those surveyed said they manage all of their investments on their own doesn't necessarily indicate successful personal financial management. In reality, of those do-it-yourselfers surveyed, one-third said they feel confident handling their own finances. But nearly the same amount – 32% surveyed – said that financial advisor fees are too high. Another 32% said they don't want someone else in control of their money. Yet another, more sobering, factor is that 18% feel embarrassed about their financial situation. Another 18% said the lack of digital tools and platforms available to engage with financial advisors is causing them to take on managing their own finances.
Whether Americans are managing their money with a financial advisor or going at it on their own, the survey found that nearly two-thirds of respondents, or 65%, said they have investments and/or investment accounts, of which the most popular are stocks at 48%, cryptocurrencies/digital assets at 43%, mutual funds at 41%, and real estate and bonds each at 36%. Revelli told ZDNet that, she was surprised so many respondents were invested in some form of cryptocurrency. "It suggests that there's a strong interest in cryptocurrencies among average American investors."
Whether the substantial percentage of American investors surveyed invest in crypto because it's an alternative path to wealth for those who weren't previously invested, or a means to get rich quickly is anyone's guess. For Revelli, it raises more questions than answers. "Moving forward, it will be interesting to examine what is driving this trend and increased interest in a new asset type, and if it lasts…is it the social awareness and buzz? Is it the easy access to invest versus traditional investments?
Regardless of why people are adding cryptocurrency to their financial portfolio, Revelli sees a clear need for more education around these new asset types, especially because they carry a level of risk. "Financial professionals should be proactive in guiding individual investors on how to incorporate cryptocurrency into a personalized and diversified investment portfolio."
The large percentage of do-it-yourselfers also signifies an opportunity, and need, for financial education in the US. "There is no one-size-its-all solution for quality education and advice, but we know that there are some core tenants that everyone should learn," Revelli told ZDNet. "In the absence of standard and widespread financial education that's taught in high school or college, financial professionals should play a big role in delivering financial education through their services or through volunteer work like pro bono planning for underserved communities or teaching in schools," she said, adding that non-profit organizations like the National Endowment for Financial Education are credible resources.
Despite the recent, stressful news about inflation and other major economic issues, Revelli sees a silver lining in financial education. "People now more than ever are looking for ways to prioritize their responsibilities and achieve financial peace of mind. As an industry, we need to increase access to quality financial education and advice for all income levels."