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How To Bridge the Financial Product Knowledge Gap And Drive Business
60% of adults would buy more financial products if only they knew more about them
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Happy post-Thanksgiving Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
Today we’re discussing the huge knowledge gap about financial products among US investors, and the remarkable opportunities that presents for advisors to help clients and drive business.
So, let’s get into the Industry Chatter!
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INDUSTRY CHATTER
Recent findings from Barnum Financial Group reveal a critical insight for financial advisors: 60% of adults would buy more financial products if only they understood them better, with this figure rising to 72% among young Millennials.
The survey reveals several knowledge gaps that financial advisors can address to better serve their clients and drive business. First, there's a substantial knowledge gap regarding ETFs, derivatives, and alternative investments across all generations. Even as ETFs gain market prominence, no generation reports feeling "very experienced" with these products. In addition, more than half of young Millennials consider themselves knowledgeable about cryptocurrencies, but those numbers drop for other kinds of investments (and other age groups). This presents opportunities for advisors to drive business through more effective educational strategies and communication methods.
Big Gender Gap In Financial Preparedness
The survey also highlights a concerning gender disparity in financial preparedness, with 88% of men reporting feeling financially prepared compared to 66% of women. Advisors should evaluate their approach to ensure they're effectively reaching and serving female clients, who may benefit from different communication styles or educational resources.
Income levels significantly impact product utilization, with higher-income clients ($200,000+) showing markedly greater engagement across investment products compared to those earning under $149,000. However, even among affluent clients, 42% cite confusion about fees and costs as a barrier to purchasing financial products. This indicates a need for greater transparency and clearer communication about pricing structures.
Affluent Adults Mostly Want Peace Of Mind
The research also reveals that retirement planning remains the primary financial goal, with 80% of affluent adults seeking peace of mind through financial planning. Debt management emerges as a crucial concern, with many defining financial freedom in retirement as being debt-free. Advisors should consider incorporating more comprehensive debt management strategies into their retirement planning services.
To address these challenges, advisors need to focus on creating individualized plans that remove emotional reactions from the retirement planning process, while developing more effective educational resources that demystify complex financial products and fee structures.
MARKET RECAP
In a shortened trading week for the Thanksgiving holiday, President-elect Donald Trump sent shockwaves through the markets by announcing plans to impose a 25% tariff on all imports from Mexico and Canada alongside a 10% hike on Chinese goods. These measures, he indicated, aim to pressure these countries to address drug trafficking and illegal immigration.
Currency markets reacted swiftly, with the Mexican peso and Canadian dollar plunging to two-year and four-year lows, respectively, before stabilizing as investors reassessed the risks.
The escalating trade tensions took a toll on U.S. automaker stocks, particularly General Motors Company (GM), which relies heavily on Mexican production. GM shares tumbled nearly 5% on the week, snapping a three-week winning streak.
Despite the looming risks of a new trade war, broader equity markets remained resilient. The S&P 500 and Dow Jones Industrial Average both extended their record highs, reflecting investor appetite in a historical positive season for stocks.
Small-cap stocks, tracked by the Russell 2000 via the iShares Russell 2000 ETF (IWM), also surged, hitting fresh all-time highs on Monday and surpassing their previous peak from November 2021.
Tariffs Hit Automakers
S&P Global estimates that tariffs on Mexico and Canada could slash U.S. automakers' profit margins by as much as 17% in a worst-case scenario. General Motors and Stellantis are expected to be the hardest hit given heavy reliance on Mexican auto exports.
Seasonal Stock Rally
The stock market often excels during the holiday season. Data shows the S&P 500 historically rises 1.5% in December, with November delivering a 1.2% gain on average since 1950. Analysts attribute this to strong retail spending, end-of-year portfolio adjustments and positive sentiment, making it a historically favorable period for investors.
Mortgage Rates Reality
Compass CEO Robert Reffkin indicated that homebuyers are adjusting to the reality of 7% mortgage rates. As affordability pressures ease and inventory remains tight, he expects demand to stabilize. The normalization process could help the mortgage market regain momentum despite challenges posed by elevated borrowing costs.
Fed's Disinflation Confidence
The Federal Reserve’s November meeting minutes reveal officials’ confidence in declining inflation. Markets anticipate a greater likelihood of a 0.25% interest rate cut next month.
THE WEEK AHEAD
Economic Data
Monday: US construction spending and manufacturing prices
Tuesday: US job openings survey results
Wednesday: US nonfarm employment change, crude oil inventories
Thursday: October US imports, exports, and November initial jobless claims
Friday: EU Q3 GDP, US November average hourly earnings
Earnings
Click here for the full calendar of economic data and earnings reports.
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