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More Investors Seek Professional Advice, CFP Study Shows

With the markets continuing their volatility, the number of consumers seeking professional advice has risen slightly.

The 2002 Consumer Survey by the Certified Financial Planner Board of Standards of Denver also shows consumers who currently use professional financial advisers are more likely to be "extremely satisfied" with the advice they receive than they were when the last study was conducted in 1999.

The survey was conducted via a written questionnaire in October and November. It includes responses from 996 people in the top-income quartile for their age group.

The growth in consumers seeking professional advice was apparent from two measurements. Respondents who consulted a financial planner rose to 37% in 2001 from 32% in 1999, and those who use a financial planner as their primary financial adviser rose to 22% in 2001 from 19% in 1999. The number of consumers who served as their own adviser declined to 45% in 2001 from 28% in 1999.

The number of clients of all types of financial professionals who were "extremely satisfied" with the advice they received increased to 44% in 2001, from 38% in 1999. Clients of financial planners only reported a higher satisfaction rate, with 47% of them saying they were "extremely satisfied" with their advice, up from 39% in 1999. Clients of certified financial planners were even happier with their service, with 55% reporting they were "extremely satisfied," up from 41% in 1999.

"It's heartening to see that Americans are deciding to play an active role in their financial futures by reaching out to qualified financial professionals," said Elaine Bedel, chairwoman of the CFP board of directors. Bedel is also president and owner of Bedel Financial Consulting of Indianapolis. "In the boom market of 1999, consumers probably figured the advice they were receiving didn't matter much. Perhaps they felt they could do as well on their own. Today, the answers aren't as easy."

Bedel also noted that the fact that the highest level of satisfaction is among clients of certified financial planners could be an indication that investors now appreciate a comprehensive approach to financial planning. "Rather than simply looking for someone to manage their money, the clients of CFPs were much more likely to be interested in advice on a broad range of financial matters," Bedel said. "The down market has really prompted consumers to look beyond their investments to evaluate their total financial needs."

As consumers look for professional advisers, they have become more interested in their credentials. Thirty-seven percent in the latest survey said they were interested in such credentials as degrees, experience and professional accreditation, an increase from 31% expressing an interest in these credentials in the 1999 survey.

As to what type of characteristics they seek in an adviser, 97% said they wanted someone trustworthy, and 96% said they wanted someone who listens. Another 95% said they wanted an adviser more interested in meeting their needs than in selling products, and 95% said they looked for someone with a good performance record.

Investor Trends

The survey identified three groups of consumers: "worriers," "help wanteds" and "independents." The percentage of worriers, those who fret about their financial situation but do not take action, fell four percentage points to 38% from 42% in 1999. The number of help wanteds, those who know they need financial help and seek it out, increased by five percentage points to 29% from 24% in 1999. The percentage of independents, consumers comfortable handling their own finances, remained steady at 33%.

The study also divided consumers into three life stages: those in the 25 to 39 bracket who are "up and coming," those aged 40 to 54 who are in "mid life," and those aged 55 to 65 on the "retirement cusp."

The survey showed that the down market has dampened the youngest group's interest in saving for retirement, with only 72% reporting they are working toward this goal as opposed to 77% in 1999.

Among mid-life investors, one notable consumer shift was a greater interest in building an inheritance for heirs, with 18% reporting such an interest as opposed to 12% in 1999. One of the biggest concerns among those on the cusp of retirement was building an emergency fund, with 30% citing this as a concern versus 25% citing this as a concern in 1999.

Thirty-eight percent of all consumers surveyed have a written financial plan. Older or wealthier consumers appear more likely to have a plan, with 52% of retirement cusp investors and 46% of investors with a net worth of more than $500,000 reporting they have a written plan. And of those with a written plan, 38% review it annually.

Seventy-three percent of consumers with a written plan wrote it with the help of a financial professional, with 48% of this group using a financial planner for the task.

Finally, while consumers' satisfaction with financial advice is increasing, the survey detected a level of confusion over whom to turn to for advice. While 70% of consumers agree that financial advisers are a good source of information about financial products, nearly half feel it's hard to know who's qualified to dispense advice.