A new survey from the National Association of Insurance and Financial Advisors found that 80 percent of the lobbying powerhouse’s 30,000-member group work primarily works with middle-income clients.
The survey also found that 98 percent of NAIFA members charge commissions and many provide free financial planning.
The findings provide critical fodder to NAIFA as it fights to position its members as the “affordable financial advisors” in its battle with regulators and lawmakers over how to regulate investment professionals who aren’t Securities and Exchange Commission registered investment advisors (RIAs).
While RIA purists want the SEC to implement a fiduciary standard for any practitioner offering investment advice, NAIFA and the insurance industry argue that such a rule would force agents and brokers into asset-based fee-only arrangements with clients and out of commission-based transactions that allow them to work with the middle class.
Our survey shows “there is no shortage of professionals offering individualized financial advice and services for middle- and lower-income Americans,” NAIFA CEO Kevin Mayeux, CAE said. “NAIFA members are in communities across the United States striving to ensure financial security and prosperity for friends and neighbors as well as local families and small business owners. That’s what we mean when we say that NAIFA represents the interests of Main Street Americans.”
The survey found that 80 percent of NAIFA members say their businesses primarily serve middle- to lower-income families and individuals. Almost half (45 percent) say the “typical annual household income” of their clients falls between $50,000 and $100,000; 34 percent say their typical client’s annual income falls between $100,000 and $150,000; and 4 percent say their typical client earns less than $50,000 annually.
That is in sharp contrast to veteran fee-only registered investment advisors who have the luxury of working exclusively with clients who have investable assets of $1 million or even $10 million or more.
According to the U.S. Census Bureau, the median household income for Americans was $61,372 in 2017, up 1.8 percent from $60,309 in 2016. The 2017 real median income of family households increased 1.4 percent to $77,713.
“The fact that millions of Americans live paycheck to paycheck -- and have limited amounts to invest -- suggests a critical need for affordable financial advice,” Mayeux said. “Many households and businesses do not have large enough portfolios to satisfy the minimum balances that nearly all investment advisors require, nor do they have the funds to pay the costly fees often associated with receiving a financial plan or guidance from an investment advisor.”
When asked about the forms of compensation NAIFA members receive for services, sales commissions were cited by 98 percent, followed by assets under management fees (40 percent), salary (10 percent), and hourly or other types of fees (7 percent).