What’s causing the uncertainty and lack of confidence? Increasing spending and an uncertain portfolio, for most survey respondents. Stock market volatility and increased inflation make basic budgeting feel more uncertain and unclear. This uncertainty is increasing as retirees move from predictable income sources, like pension and social security to unpredictable ones, like 401(k)s.
Financial advisors deal in confidence all day long. Whether it’s measuring the value at risk of an investment portfolio or helping a client assess their risk tolerance, confidence is a huge part of what advisors do. But when it comes to clients, you may be getting punked. New research shows that one in five Americans thinks they’ll never be able to retire. Among the people who don’t think they’ll ever retire, a decisive majority (70%) say that they won’t ever retire because they can’t or won’t be able to afford to retire.
Faking confidence isn’t always a bad thing. In fact, some circumstances require a little extra courage. Take public speaking, for example, or the first day of a new class. Any new situation that calls for action without having personal experience in the role can induce a lack of confidence. You can literally fake it till you make it in those situations. Some psychologists say that when there is a discrepancy between what the situation demands and what you are feeling, you can make a choice to act as if you have more bravery and proceed.[1]
How can financial advisors know when their clients are talking braver than they feel? They might try looking for a client’s body language. “Whenever you attempt to conceal any strong feeling and fake another, your body almost always ‘leaks’ nonverbal cues that are picked up consciously or subconsciously by your audience.”[2] And even where it’s hidden really well, an advisor’s own reaction to the client conversation might provide some guidance. Holding in emotions, like fear or lack of confidence causes not only the person faking their blood pressure to rise, but also that of the person observing.
Another key data point that advisors may want to note in the new Ipsos/Axios poll is that of those polled, 57% said they do not talk to their financial planner about their concerns of whether they’ll be able to retire. FOOTNOTE.
What’s causing the uncertainty and lack of confidence? Increasing spending and an uncertain portfolio, for most survey respondents. Stock market volatility and increased inflation make basic budgeting feel more uncertain and unclear. This uncertainty is increasing as retirees move from predictable income sources, like pension and social security to unpredictable ones, like 401(k)s. The result, as the surveyors summarized, is “a feeling of perpetual insecurity, even among those who've amassed substantial savings.” The source of these insecurities is not necessarily new. We reported on this same thing back in 2021 when we covered new data from the Nataxis Global Retirement Index. FOOTNOTE. That study showed concern among investors in four main areas: 1) inflation and its impact on supply chains; 2) low interest rates, especially the public policy of keeping those interest rates low to boost the economy during the pandemic with a resulting lag in interest income for retirement; 3) public debt and its potential impact on public retirement benefits; and 4) uncertainty or unpredictability of major stakeholders. On this last point, 7 in 10 of respondents said that “the costs of healthcare and long-term care will severely impact their financial security in retirement.”
In the Ipsos/Axios poll, a majority of those polled who weren’t retired said that Social Security would cover less than half of their expenses and they plan to rely on traditional retirement products, like 401(k), 403(b) or IRAs.
Advisors may want to be on the lookout for concerns clients aren’t voicing around their retirement accounts. A simple conversation about diversification, catch-up accounts, and tax advantaged products could to far to increase client confidence so they can fake confidence til they make it to retirement.
[1] https://www.refinery29.com/en-us/faking-confidence-self-esteem
[2] https://www.forbes.com/sites/carolkinseygoman/2017/08/02/dont-try-to-fake-confidence-do-this-instead
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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