"While it's no surprise that consumers are anxious about the economy, advisors are facing the challenge of not only managing clients' investments, but also managing the emotions and fears that influence their decisions," says John Diehl, senior vice president at Hartford Funds. "While there are a number of factors to consider, the survey findings underscore the need for both advisors and clients to recognize and evolve certain behaviors in order to effectively pursue their financial goals."
Key findings from the survey include:
- Anxiety is adversely impacting client investment decisions: Most advisors (57 percent) believe clients have allowed their anxiety to adversely impact their investment decisions. This behavior is one of the top two concerns shared by advisors today. Market volatility was the most-cited issue that is keeping advisors up at night, followed closely by client anxiety about saving and investing.
- Consumers place higher value on investment certainty than returns: More than three-quarters (76 percent) of advisors noted that their clients are prioritizing investment certainty over the potential for higher returns. Despite this sentiment, 37 percent of advisors expect their clients' risk tolerance to increase over the next 12 months, while only 17 percent expect clients to become more risk averse. Nearly half (46 percent) of advisors surveyed expect risk tolerance to remain the same.
Interestingly, this trend of shifting risk aversion follows advisors' own patterns. Thirty-seven percent of advisors reported their personal investment profile has become less conservative over the past 12 months. Only 10 percent have become more conservative, with the remaining 53 percent keeping a steadfast risk profile.
- Advisors are seeking alternatives to fixed income amid rising interest rates: Two-thirds (66 percent) of advisors surveyed indicated that the potential of rising interest rates has led them away from recommending fixed-income vehicles to their clients. The remaining 34 percent of advisors, who indicated they were not moving their clients out of fixed income, saw various benefits to sticking with their fixed-income strategy.
Forty-one percent of those respondents attribute their decision to still seeing opportunities in the bond market. Thirty-two percent believe that no other vehicles provide the same income and security; and 23 percent remain confident in the long-term performance potential of fixed-income products. Only 4 percent indicated a lack of client confidence in the equity market as their motivation for their commitment to fixed income.
- Equity Value Funds and corporate bond products provide greater clarity for clients: Ninety percent of advisors polled indicated that emerging market funds caused the greatest anxiety among clients. Sixty-five percent of advisors said international bond funds are also a cause for client anxiety.
