Northwestern Mutual

Opting to Go It Alone, Americans Remain at Odds Over Their Financial Planning

Many Americans continue to make the same financial planning mistakes of the '80s and '90s: That is, they're making reactive financial decisions without the help of a professional -- even though they admit knowing better. According to a recent Harris Interactive® survey commissioned by Northwestern Mutual, this behavior has been amplified following Sept. 11, as people live with threats of terrorism, volatile markets, a puzzling economy and corporate scandal.

"People are preparing more wills, keeping more cash on hand and making changes to their investment portfolios and retirement plans," said Meridee Maynard, CPA, CFP and a vice president of Northwestern Mutual. "They're doing all these things on their own, even though they feel an increased need for advice from a financial professional.

"These are the same mistakes many people made in the '80s and '90s, when they opted to go it alone in the stock market and failed to consider that investing is just part of a larger financial plan," Maynard said.

The survey of more than 1,000 financial decision makers with household incomes of $75,000 or more revealed:

  -- 31 percent feel an increased need for advice from a financial
  -- 63 percent of those who feel an increased need to talk with a
     professional have yet to do so.

Behavioral economists describe this dynamic -- where otherwise smart people make foolish, often conflicting, financial choices -- as a paradox of human nature. Hence, people make knee-jerk decisions about their financial needs without consulting a professional, even though they know better.

According to survey consultant and Cornell University psychologist Dr. Tom Gilovich, this disconnect in financial behavior is likely due to one of three factors:

  -- Despite the sluggish economy, people remain overconfident in their
     abilities to manage their finances -- they tend to overestimate their
     own abilities, knowledge and skills.
  -- People have a hard time translating good intentions into effective
  -- People have a general skepticism about others who might take an
     interest in their finances.  Recent corporate scandals have fueled this
     skepticism by making people question whom to trust.

"What's especially revealing in the survey is that, of those who say they feel financially secure, people who have met with a financial advisor feel more secure than those who have not," said Gilovich, co-author of the book, "Why Smart People Make Big Money Mistakes - and How to Correct Them."

Maynard, of Northwestern Mutual, said, "The message here is that it's possible to avoid the mistakes of the past. But, people need to come to terms with their own financial planning behaviors -- or misbehaviors. Seek the advice of a professional with whom you can have confidence and trust. And put together a plan that covers every aspect of financial security -- from protecting to accumulating to preserving wealth."

This latest Harris Interactive survey is the third in a series on financial behavior commissioned by Northwestern Mutual. Results of the first survey were released in February 2001 and showed a growing disconnect between people's retirement goals and the steps people are taking to achieve them. The subsequent two surveys took place in the succeeding months since the Sept. 11 terrorist attacks and economic downturn (October 2001 and June 2002).

Northwestern Mutual, the nation's leading provider of individual life insurance according to A.M. Best, has always received the highest possible ratings for financial strength from Standard & Poor's, Moody's, Fitch, and A. M. Best. In addition to life insurance, the company, its subsidiaries and affiliates are also providers of annuities, mutual funds, long-term care insurance and disability income insurance. These products and services are distributed through the Northwestern Mutual Financial Network and its 7,800 financial representatives. Among its affiliated companies are the Frank Russell Company, the investment management and advisory firm; Northwestern Mutual Investment Services, LLC (NMIS), the securities brokerage firm; and Northwestern Mutual Trust Company, a special purpose federal savings bank. Further information on Northwestern Mutual, based in Milwaukee, Wisconsin, can be found at: .


SOURCE: Northwestern Mutual

CONTACT: Deanna Tillisch of Northwestern Mutual, +1-414-665-2705, or , or Nancy Wong of Harris Interactive,
+1-585-214-7316, or

Web site:

9/3/2002 6:01:00 AM