A new report warns that with uncertainty on the rise, investors and advisors apparently are recalibrating their financial outlook.
Two-thirds of investors (66%) and more than half of RIAs and fee-based advisors (56%) anticipate market volatility will increase over the next 12 months. This is according to findings in a special report – “Safe Havens in an Uncertain World” – contained in Nationwide Advisory Solutions’ 5th annual Advisor Authority study of more than 1,600 RIAs, fee-based advisors and individual investors.
And for the first time in four years, investor and advisor optimism both declined at the start of 2019. Investor optimism fell seven percentage points, to 55% in 2019 from 62% in 2018, and advisor optimism dropped 11 percentage points, to 55% in 2019 from 66% in 2018.
“More than a decade after the Financial Crisis of 2008, concern about volatility is again top of mind for advisors and investors alike, and uncertainty is on the rise,” notes Craig Hawley, Head of Nationwide Advisory Solutions.
As such, the opportunity for advisors is substantial, the report contends. In the face of rising uncertainty, it notes that the number of investors who say they have an advisor is on the upswing, increasing 11 percentage points in four years, to 62% in 2019 from 51% in 2016.
Outlook and Concerns
Nationwide explains that optimism was high leading into 2018, fueled by the prospects of tax reform, the administration’s promise to cut regulation and a business-friendly majority in both the House and the Senate. Investor and advisor optimism both declined, however, leading into 2019, as uncertainty has prevailed—aggravated by doubts concerning interest rates, a growing partisan divide and an escalating trade war with China.
Investors, RIAs and fee-based advisors are now cautious, yet clear-eyed, according to Nationwide. Nearly 6 in 10 investors (58%) and more than half of RIAs and fee-based advisors (54%) are concerned about a U.S. economic recession over the next 12 months.
In addition, over half of investors (54%) and RIAs and fee-based advisors (56%) are concerned about a U.S. bear market over the next 12 months. Similarly, two-thirds of investors (66%) and more than half of advisors (56%) expect market volatility to increase over the next 12 months.
At the same time, investors and advisors are focused on practical matters impacting their wallets and portfolios. Investors say cost of healthcare (33%) is their number-one financial concern, followed by taxes (31%), protecting assets (27%), saving enough for retirement (23%) and inflation (16%).
RIAs and fee-based advisors also most commonly cite cost of healthcare (27%) as their clients’ number-one financial concern, followed closely by taxes, protecting assets and saving enough for retirement in a three-way tie for second place (all at 26%).
Not surprisingly, when asked what would increase the likelihood that they would work with an advisor over the next 12 months, more than half of investors (54%) say market volatility is the number-one scenario.
When asked to identify the most important benefit of working with an advisor when markets are volatile, investors with an advisor say that helping them stay focused on long-term goals (21%) is number one. This is followed closely by helping them make more informed decisions (20%) and protecting their assets against market risk (20%), according to the findings.
Meanwhile, with volatility on the rise, a large majority of RIAs and fee-based advisors (88%) have a strategy to protect their clients’ assets against market risk, but only 65% of investors in 2019 say they have a strategy to protect their own assets. This is up eight percentage points from just 57% of investors in 2018, the study notes.
The 5th annual survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from Feb. 15 – March 4, 2019, among 1,021 financial advisors and 824 investors. Among the 1,021 financial advisors, 507 were RIAs and 514 were Broker/Dealers.