Personal Financial Planning

Faced with a turbulent stock market, rising energy prices and other signs of an economy in flux, Americans are increasingly worried about their finances. And though individual investors admit to financial planners’ expertise, few consult one. So says a new survey the AICPA commissioned to better understand how Americans manage their money.

The survey, “Report on America’s Financial Health,” was conducted by Harris Interactive, an Internet-based market research firm, for the AICPA personal financial specialist examination committee in September and October of 2000. It polled 636 Americans ages 18 to over 55 with annual income of more than $75,000.

Almost all respondents (91%) said they manage their finances themselves—doing their own research and obtaining advice from family, friends, the Internet or a broker. CPA/PFS practitioners may see potential market opportunities in this and the survey’s other findings.

For example, the survey revealed that almost three out of every four respondents (71%) have been thinking more about their finances in the last two years. But only 20% thought they were “very prepared” for retirement. Others were uncertain about their financial future; 81% were not sure their investments were earning as much as possible and 57% were not certain they knew how to minimize their taxes through proper planning.

The survey also revealed that even individuals who felt confident about their money management skills may have been off the mark. More than half of those who believed they were maximizing savings and earnings felt this way because they had personally researched their mutual funds, understood how much investment risk they should take, had a short-term savings plan or owned real estate.

But almost 90% of the respondents lost money in the last five years because of quick decisions they made about financial matters without talking to a financial planner.

Why didn’t more of these investors consult one? Most sought professional advice in special situations rather than as a matter of overall strategy. For example, respondents said they would contact a financial planner if they inherited a substantial sum, wanted to plan for retirement, needed estate planning advice, wanted to roll over 401(k) or IRA funds or were confused by changing tax laws.

But when it came to choosing an adviser, respondents said they considered a designation particularly significant, and nearly 40% viewed the CPA/PFS credential as the most important indicator of financial planning competence.