Advisor Value A Voya Retirement Research Institute Study quantifies the benefits of working with a financial advisor

Advisor Value A Voya Retirement Research Institute Study quantifies the benefits of working with a financial advisor

In the Voya Retirement Revealed1 study of 4,050 working Americans, just 28% of study respondents work with a financial advisor. And yet working regularly with a financial advisor can have a profoundly positive end result on retirement and investment behaviors, actions, confidence and results. All data in this report were revealed in that study. ii I 1 Partnering with ORC International, The Voya Retirement Research Institute examined attitudes and activities of 4,050 adults age 25-69 with a household income of $40,000 or higher, who were employed full time. Data gathering via an online panel took place in the Fall of 2011.

We often behave in ways that aren t good for us. With respect to retirement and investment, that can be especially true. For example, studies show that individuals often hesitate to address and seek help for their financial futures, including retirement, despite strong evidence that working with a professional can increase knowledge, confidence and lead to better savings habits and potential longer-term results. In this report Retirement Savings...2 Confident and In Control Investors...4 Retirement Expectations...6 Goals and Planning: Long- and Short-term...8 Credit Where (and When) It s Due...10 Summary: Advisors Add Value...11 I 01

Using an advisor increases the likelihood that an individual will maximize retirement plan contributions. Retirement Savings Consulting a financial advisor produces higher utilization and better participation in employer-sponsored retirement savings plans. Availability of employer-plans (such as 401(k)s) is roughly the same for those who do and do not use advisors (90% and 88%, respectively). Use of employer plans, however, is higher for individuals who work with a financial advisor: Use an advisor Don t use an advisor Have ever contributed to an employersponsored retirement savings plan Currently contributing to an employersponsored retirement savings plan 92% 86% 80% 74% People who use an advisor also contribute higher percentages of pay to their current employers plans. Employer Plan Contribution % of pay They are also slightly more likely to be contributing to receive the full employer match, 74% to 71%, and to be contributing or more of pay, 8% vs 5%. Individuals who use an advisor are also less likely than those who don t to report that they contribute only what they can afford to their retirement plans. They are also slightly less likely to report that the match minimum determines their participation level. It s important to note that, while contributing at least to the match level is generally a good DC plan behavior, it may also anchor a contribution at a relatively low percentage (when the match is set at a lower percent). On the other hand, individuals who consult with an advisor are significantly more likely to contribute the maximum allowed to their employer plans. (Very few, whether or not they use an advisor, report that they anchor at an automatic contribution level established by an employer) 02 I

Contribute (to Employer Plan) What I can afford 45% 51% Maximum allowed Minimum for a full match 28% 19% 21% Amount set by my employer 7% 8% Nearly a quarter of all individuals in this study who go it alone (do not work with an advisor) have an employer plan account balance of less than $10,000; people who do work with an advisor are 10% less likely to have this lowest account balance. At the other end of the spectrum people who work with an advisor are twice as likely to have an employer account balance of $200,000 or more. Employer Plan Employer Account Plan Balance Account Balance 25% % of participants 15% 10% 5% 0% <$10,000 $10,000 - $24,999 $25,000 - $49,000 $50,000 - $74,999 $75,000 - $99,999 $100,000 - $199,000 $200,000+ 23% 19% 18% 10% 7% 13% 9% 13% 17% 16% 11% 8% 16% 19% Average account balance Working with an advisor significantly increases the likelihood that an individual will also have additional (i.e. non-employer-plan) retirement savings. 90% of advisorassisted individuals report additional retirement savings, versus just 70% of selfdirected savers. And the amount saved, within and outside of an employer plan, is higher for those who use advisors. Total Average Retirement Savings Average Contribution to Employer Plan: Use an advisor: 10% Don t use an advisor: 8% I 03

Use of an advisor can increase feelings of control and confidence in understanding how to pursue one s retirement goals. At the same time, it can also reduce expectations of guidance from employers. Confident and In Control Investors Seeking advice can increase an individual s sense of control a critical component of retirement investing. People who use advisors are more likely to feel in control of their retirement investment. At the same time, they were less likely to expect more from their employers in terms of retirement education and guidance. Feel in Control of Feel in Control of Employer-Plan Investment Employer-Plan Investment 77% 71% 42% Expect More Retirement Expect More Retirement Education from Employer Education from Employer 49% Use Know Advisor How to Achieve Retirement Goals Know How to Pursue Achieving Retirement Goals 79% 58% People who choose to invest without the guidance of an advisor are highly risk-averse; 39% characterize themselves as conservative investors, vs. 19% of advisor-assisted individuals. At the other end of the spectrum, however, advisor use does not appear to impact aggressive investment style; 13% of those who use an advisor and 12% of those who don t consider themselves Aggressive investors. Investment Style Investment Style 67% 39% 48% 19% 13% 12% Conservative Moderate Aggressive 04 I

Most people do feel that there s something in the way of letting them save as much as they d want, that they have barriers to saving. Advisors, however, can help people overcome those barriers; 60% of people who use an advisor report that something gets in the way of saving, but that saving-challenged percent jumps to 78% of individuals who don t use an advisor. For all, Insufficient Income is the most significant barrier. Barriers to Retirement Saving Barriers to Retirement Saving Most have barriers to saving 78% 60% Don t use an advisor Use an advisor Insufficient income 31% 35% High debt Don't know what my options are 10% 13% 18% 27% Advisor use appears most impactful in migrating investors from Conservative to Moderate investment styles. Don't have access to a financial professional 1% 4% Generally, people who use advisors feel more empowered to save. Debt is a far more significant savings barrier for those who do not use an advisor than it is for those who do regularly consult advisors. I 05

Individuals who use advisors spend more time thinking about retirement. Those who do not use an advisor are twice as likely (than those who do) to say that they spend no time thinking about retirement. Retirement Expectations Sixty-six is the magic number when it comes to overall anticipated retirement age. People who work with an advisor plan, on average, retire at age 66.8 and those who don t use an advisor hope to retire at 66.7. Individuals who use an advisor, however, may be more realistic and better prepared to reach that goal. They are significantly more likely to have formally calculated how much they will need to save for and fund retirement, and to have a formal, written plan to help them get there. Time Thinking About Retirement Time Thinking About Retirement 60% 50% 40% 30% 10% 0% A lot Some A little None 8% 36% 47% 9% 5% 27% 50% 18% 06 I

Calculating and Planning Retirement Calculating and Planning Retirement 59% 37% Have calculated how much needed to retire 52% Have a formal retirement investment plan Spending time with an advisor increases the amount of time people spend thinking about retirement and the likelihood that they will have calculated and documented their savings and retirement needs and goals. Regardless of advisor use, people are most worried about healthcare costs in retirement. Working with an advisor results in probably realistically increased awareness of the potential of healthcare expenses to compromise retirement. People who work with an advisor are also slightly more fearful about experiencing another financial crisis in retirement but significantly more confident about not having to return to work because they ve run out of savings. Those who don t regularly consult an advisor are somewhat more concerned about having to return to work out of economic necessity. Greatest Fears About Retirement Greatest Fears About Retirement Healthcare costs Experiencing another financial crisis Having to return to the workforce because I run out of savings Having to rely on my children for financial support Not having anything to pass on to my children or grandchildren 6% 8% 6% 8% 24% 21% 18% 24% 45% 39% Feelings of Preparedness for Retirement Feelings of Preparedness for Retirement 59% 14% 5% 38% 36% 7% 21% Very Somewhat Not very Not at all I 07

People who work with advisors are more likely to say that their primary use of discretionary income is to additional savings; those who do not use an advisor are more likely to allocate to entertainment and extras. Goals and Planning: Long- and Short-term Advisor clients are better equipped to deal with life s unexpected and financially unpleasant surprises. They are significantly more likely to have an emergency fund, and that fund is larger than for those who forgo using an advisor. Months Salary in Emergency Reserve Months' Salary in Emergency Reserve 50% 40% 30% 10% 0% 1 month 3 months 6 months+ 25% 25% 28% 17% 30% 43% Debt is a bigger issue for people who don t work with an advisor; they are more likely to say that their ability to save is impeded by debt, as well as that reducing debt is a primary short-term financial goal. Individuals who work with advisors are more likely to be able to focus on more positive short-term goals: Building an emergency fund, or even saving for a vacation. Primary Short-term Financial Goal Primary Short- term Financial Goal Use Advisor No Advisor Reducing debt 46% 57% Crea9ng an emergency fund Saving for a vaca9on PuAng a down payment on a house 29% 22% 19% 13% 7% 8% Most respondents do report that they have at least some regular discretionary income, after regular bills and financial obligations are met on a regular basis, 91% who use advisors and 85% of those who don t. For those who use an advisor, more of those extra dollars are dedicated to saving. Primary use of Discretionary Income 08 I

Retirement is, for all, a primary long-term goal, but significantly more so for advisor-guided investors. Debt, again, emerges as a bigger barrier for individuals who do not use advisors. Primary Long-term Financial Goal Primary Long-term Financial Goal Saving for retirement Paying off debt Purchasing or owning a home College tuition for my children 6% 11% 15% 23% 8% 10% 53% 67% Passing money to my children 4% 2% What s more, individuals using an advisor are twice as likely to report that they are on track to meet their retirement goals. Financial Goal Status 55% 57% 42% 27% 16% 2% Met my goals or on track to retire when I want to. Just warming up; just started and have a long way to go On the sidelines; not started yet I 09

Participants age 50 and older can make catch-up contributions to their DC plans, yet very few of them do so. Credit Where (and When) It s Due Credit cards are a fact of life in today s economy and have both beneficial and potentially harmful uses. People who consult with financial advisors appear to be more likely (than those who don t) to practice productive credit use, using cards to accumulate points or credits, maintain accurate records and to make online travel purchases. On the other hand, they are less likely to say they use cards to pay for something they could not otherwise afford, and demonstrate much more credit-responsible payment habits. They are roughly half as likely as non-advisorconsulted individuals to maintain running credit card balances; and two-thirds (64%) pay off credit cards every month. Why Use Credit Cards Why Use Credit Cards Use Advisor No Advisor Shop Online To book travel To accumulate points To pay for gas Prefer not to carry cash To build credit To pay bills To get a credit for opening a store card To buy something I normally couldn't afford To keep accurate financial records To accumulate non- point rewards I chose not to use my credit cards 3% 4% 17% 19% 17% 24% 25% 25% 39% 31% 37% 36% 34% 29% 47% 44% 58% 56% 61% 51% 54% 64% 65% Credit Card Payment Practice Credit Card Payment Practice Pay it in full every month 45% 25% 30% Pay it off over the course of several months 64% 16% Always keep a running balance 10 I

Summary: Advisors Add Value People who regularly use advisors are highly reliant on them. Three-quarters rely on them for holistic, full-picture financial guidance, and two-thirds say that a financial professional is their primary source of financial guidance and advice, compared to just 8% of non-advisor-users who rely on professional advice. Main Source of Financial Guidance Main Source of Financial Guidance 57% 67% 8% 10% 25% In addition to better credit card use and payment habits, people who work with an advisor carry a lower average credit card balance: $5,958 vs. $6,667. Personal research / internet / media Financial professional Family / friends Individuals who don t use financial advisors are more likely to rely on their own resources in the financial decision-making process but don t appear to be better off for it. They save less, have less saved, and are less likely to practice responsible credit behaviors. They are less confident about their financial situations and futures, and their retirement prospects. Still, actively consulting an advisor on a personal and regular basis may or may not be practical for many individuals. Today, advice and guidance are available in many shapes and forms, often in conjunction with a workplace retirement arrangement or plan. These services can range from professionally managed portfolios via Target Date or Balanced Funds to holistic Managed Account guidance and/or portfolio management to full-service on-line, phone-based or in-person financial planning. There is likely a flavor or advice or guidance for nearly everyone. The challenge is getting more people to the table to have a taste. Visit www.voyaretirementresearchinstitute.com for additional Retirement Revealed insights and reports I 11

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Additional copies of this report can be downloaded at the Voya Retirement Research Institute www.voyaretirementresearchinstitute.com. This paper has been prepared by the Voya Retirement Research Institute for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary are subject to change without notice based on market conditions and other factors. The information provided is not a recommendation to buy or sell any security. Products and services offered through the Voya Financial family of companies. 166639 3024666.X.G-2 2015 Voya Services Company. All rights reserved. CN0703-19855-0816 Voya.com