Consumers Think Financial Professionals too Expensive but Technology Can Ease Concerns

Online tools and other resources can help establish the trust necessary to open a conversation about how life and annuity products can provide financial security in an affordable manner.

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Perhaps the single greatest challenge for insurers generally and life and annuities (L&A) companies in particular, is to be able engage with customers to communicate the benefits of protection and retirement products. However, consumers are reluctant to engage with financial professionals because of perceived cost, according to a new survey conducted by American United Life Insurance Company (AUL, a subsidiary of OneAmerica Financial Partners, Inc. (Indianapolis). However, the survey suggests that online tools can play a part in opening the way to engagement.

The survey found that 65 percent of respondents do not work with a financial professional. Of the 7,545 people surveyed by AUL, individuals under 50 years of age are the least likely to work with a financial professional (27 percent), followed by those who have a household income of less than $75,000 (26 percent). Men and women engage with a financial professional at about the same rate at 35 and 34 percent respectively.

Financial Advice “Too Expensive”

Twenty-three percent of respondents say they weren’t sure why they don’t work with a financial professional, 24 percent said they prefer to make their own decisions, and 23 percent opined that financial professionals were too expensive.

“These findings underscore the importance of earning and building participant’s trust,” comments Marsha Whitehead, VP, retirement services for the companies of OneAmerica. “To put clients at ease, financial professionals should clearly explain fee structures, the impact of not working with a financial professional and other basic concepts right up front. They need to dispel any misconceptions and keep consumers interested in learning and doing more.”

AUL’s survey is further evidence of consumers’ misconceptions about the costs of products provided by life and annuity companies. As IIR reported in May, Millennials seriously overestimate the cost of life insurance. A recent LIMRA/Life Happens study found that the median estimate under-25-year-old consumers gave for a $250,000 level-term insurance policy for a healthy 30-year-old was nearly 10 times its actual cost. Nearly 20 percent overestimated the cost by 30 times. A study by Corporate Insight found that younger consumers in particular valued transparency but were wary about financial institutions, especially with regard to what they perceive as ambiguous fees or pricing. Their misconceptions resulted in what the researcher called “self-defeating behavior” with regard to their financial needs. To address those misconceptions Corporate Insight recommended that L&A companies provide education, advertising and more prominent and effective quote-generation tools.

(Related Content: Technology Key to Tapping Millennials’ Propensity to Buy Life Insurance, Retirement Products)

Financial professionals may have greater success reaching consumers through small forums, one-on-one meetings and other opportunities for answering questions and demonstrating expertise, including a variety of online channels, according to OneAmerica’s Whitehead. “Resources such as webinars, podcasts and videos can introduce consumers to financial concepts and help them feel more comfortable seeking out a financial professional for more personalized and ongoing assistance,” she says.

AUL’s survey also revealed traits of the 35 percent of respondents who do work with financial professionals. Fifty-three percent confident or very confident about maintaining their lifestyle through retirement; and sixty-eight percent of these respondents plan to continue to work with a financial professional through retirement. Sixty-eight percent are more likely to have calculated their retirement income need, which validates L&A companies’ investments in online tools including calculators and other

(Related Content: Prudential’s Retirement Planning Site Built with “Outside-In” Philosophy)

“Knowing why individuals choose not to work with a financial professional and understanding the characteristics of those who do, will help us determine how to best reach out to consumers and address their concerns,” said Whitehead. “Being ready to explain the tangible benefits of working with a financial professional is critical in helping them reach retirement readiness.”

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at or (503) 936-2803.

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