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Financial Advisors Surprised by Clients’ Patience

Industry Trends and Research

Despite waning confidence in the U.S. economy, a new survey of financial advisors revealed that their clients are remaining patient even though they have slightly more anxiety about their investments.

When asked what has surprised them most about clients in light of recent market volatility, 33% of advisors said “patience,” according to InspereX’s seventh Pulse Survey. Moreover, nearly 7 in 10 (69%) said their clients are more comfortable with volatility than they were in the past. The good news, according to the findings, is just 11% of advisors said the market downturn has caused friction between them and their clients. 

Conducted online June 6-10, 2022, by Red Zone Marketing on behalf of InspereX, the survey features nearly 800 financial advisors, representing advisors from independent broker/dealers, wirehouses, banks and RIAs.

Surprisingly, the vast majority expect markets to rebound in the second half of the year. More specifically, 39% of advisors expect a loss of 10%, 37% expect markets to close even on the year and 12% expect a gain of 10%. However, advisors’ confidence in the U.S. economy dropped 20% since last measured in October 2021.

Of the remaining 12% of respondents, 11% expect a decline of 20% or more, with 1% expecting a return of 20%. When the survey closed on June 10, 2022, the S&P 500 was down approximately 18% on the year.

Most advisors (70%) said the average performance of their non-retired clients was down between 1-14%; another 21% said clients are down between 15-24%; just 3% said they were even on the year and only 5% said they were up on the year. 

Notably, 30% of advisors said their clients are talking about delaying retirement due to recent market weakness.

Shared Concerns

Meanwhile, advisors and clients are on the same page in terms of what they are worried about, citing inflation, market volatility and rising interest rates as their top concerns.

“The overwhelming majority of financial advisors we surveyed last year expected to see heightened volatility in 2022, which has seemingly helped them prepare portfolios and clients for the turbulent environment we’re experiencing today,” notes Chris Mee, Managing Director and Head of Market-Linked Products Distribution at InspereX. “While broad market drawdowns can be discouraging and distract clients from their long-term goals, markets like these underscore the importance of the advisors’ role and it is encouraging to see advisors optimistic about the path forward.”

Practice Management 

Turning to client communications and attracting new business, the survey found that nearly half (46%) of advisors said in-person meetings are now the main way they are meeting with clients, while 33% said they are predominantly meeting via phone and 21% are meeting virtually, which represents a decline from 32% when asked in October 2021.

For advisors embracing virtual prospect meetings, 23% said they have closed significant new business, while 31% said they have opened a few new accounts, but not as many as they had hoped.

Two-thirds of advisors surveyed (66%) said the majority of their team is back full-time in the office, with 22% saying they are operating permanently on a hybrid schedule. Another 6% of advisors said their team is fully virtual on a permanent basis.

What’s more, because of the recent market volatility, 34% of advisors said they are meeting with clients more often face-to-face. In addition, 37% of advisors said the recent downturn in markets has led to a large number of new client prospects.

To that end, the top six ways advisors are growing their business in 2022 are:

  • referrals without asking;
  • asking for referrals from clients and strategic alliances;
  • in-person networking;
  • email marketing;
  • email newsletter to prospects; and
  • live client appreciation events.

“Despite all that has changed over the past few years, the power of the referral remains strong, and this trend underscores advisors’ resilience and commitment to their clients’ investment objectives,” Mee emphasizes. “Regardless of how your practice is positioned, a customized approach to your client needs should remain paramount.”