More than half of consumers prefer to pay a flat fee for financial planning services, according to a new report.
LIMRA published this finding in a summary of results from two surveys of consumers, including “Bye-Bye Commissions” and “Use of and Impact of Advisors,” both published this year.
The report reveals that 55 percent of consumers prefer to pay an advisor a flat fee to develop and implement a plan for retirement income. This compares to 13 percent of consumers who prefer to pay an annual fee and 9 percent of consumers who prefer to pay a commission.
Similarly high percentages of consumers say they prefer to pay an advisor a flat fee to develop and maintain a financial plan (55 percent), secure advice on insurance types, amounts and options (58 percent) and get advice on types of investment options to buy and sell (54 percent).
A greater preference for flat fees, LIMRA reports, extends to the purchase of insurance and investment products. Nearly seven in 10 consumers surveyed say they would prefer to pay a flat fee when buying life and health insurance (68 percent), plus auto and homeowner’s insurance (67 percent). Nearly six in 10 respondents indicate a preference for a flat fee when buying or selling stocks and bonds (58 percent) or buying and selling mutual funds (57 percent).
The preference for a flat fee falls below a majority of respondents (44 percent) only when consumers are asked how they want to buy or sell real estate. This percentage is nonetheless greater than those indicating a preference to pay a commission (36 percent) or an annual fee (20 percent).
Just one in five consumers (20 percent) surveyed by LIMRA say they are willing to pay more than $100 for a comprehensive analysis of finances, including retirement and investment strategies. This minority falls to 15 percent of respondents prepared to pay more than $100 for advice on financial risks, appropriate insurance products, amount and coverage to buy.
The survey notes also that consumers who use insurance and financial advisors are more confident in their financial situation than those who don’t (71 percent versus 43 percent). Consumers who use advisors also save more than those who don’t.
The former defer more than 7 percent of their income into an employer’s defined contribution retirement savings plan. This compares to about a 4 percent deferral rate among consumers who are without an advisor.