Why financial professionals need to consider financial health within the context of households’ entire balance sheet.

The debt levels of American households have increased significantly since the 2007-2009 economic recession. These high debt levels have created significant challenges for average American households: Data from the 2016 Survey of consumer finances suggest that American households with net worth under $1 million spend more in total interest payments on debts than they can expect to gain from their financial assets.¹

Financial firms and advisors have historically spent more time focusing on the asset side of the household balance sheet than the liability side. As the industry shifts to using the lens of financial wellness to assess individuals’ overall financial well-being, financial professionals need to consider their clients’ financial health within the context of the households’ entire balance sheets, taking both assets and liabilities into consideration.

Key findings

• Financial planning firms and advisors should put more emphasis on their clients’ debt structures and provide liability management assistance.
• Households with lower assets, income and education levels need the most assistance and could benefit significantly from debt management.
• Advisors and financial services firms should consider alternative approaches to helping consumers improve their financial well-being by targeting both sides of the household balance sheet.

Download the white paper