Lump-Sum Distributions Send Most Investors to an Adviser

Nine out of 10 recipients of lump-sum distributions invested at least some of the money, with the majority (59%) investing all of the money, according to a survey conducted for the Forum for Investor Advice. The survey is the first to measure the behavior of people who receive cash payouts for retirement, inheritances or insurance settlements, according to the Bethesda, Md.-based group of adviser-sold

Nine out of 10 recipients of lump-sum distributions invested at least some of the money, with the majority (59%) investing all of the money, according to a survey conducted for the Forum for Investor Advice. The survey is the first to measure the behavior of people who receive cash payouts for retirement, inheritances or insurance settlements, according to the Bethesda, Md.-based group of adviser-sold funds.

The average payout was $87,000, with one-third of the recipients receiving more than $100,000. According to the survey, most of the recipients are not experienced investors and only 14% considered themselves very knowledgeable. Only 42% of respondents reported feeling happy or excited about the money. The chunks of change were large enough that they evoked "anxiety, numbness or guilt" in some respondents.

Where did these people turn with their money and emotions? About 59% of those who invested some or all of their payout sought advice from a professional adviser. About 84% of the people who sought advice found the adviser on their own, according to the survey. Only 14% say the adviser proactively contacted them.

Investors with larger payouts were more likely to get help. Two-thirds of those who received payouts of more than $50,000 sought advice. This dropped to 49% for those receiving payouts of less than $50,000. Financial planners are the most commonly used financial professionals, followed by stockbrokers.

Those who used financial advisers were far more likely to put their money into investments that offered the potential for capital appreciation, long-term growth and tax advantages than those who invested the money on their own. For example, 60% of advice-seekers put money in mutual funds, compared with only 43% of do-it-yourselfers. Almost all the households that worked with an adviser took some of the recommendations, while about half took all of the adviser's recommendations. Satisfaction among the people using advisers was almost universal with 96% saying they were at least somewhat satisfied.

Chicago-based Market Facts conducted the study for the Forum for Investor Advice. Market Facts sent questionnaires to 1,000 people who received a large cash payout of more than $20,000 between 1994 through 1996. A total of 712 households completed the questionnaire.

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