New polling data by Hartford Funds reveals that difficulty recruiting and retaining talent are among this year’s top concerns among financial advisors.
When considering their practices, advisors’ primary concerns for 2020 are the impact of an economic slowdown and sourcing new talent, with both issues registering at 31%. Advisors also fear the impact of geopolitics on their clients’ portfolios, according to the survey of 109 financial advisors.
The Hartford Funds conducted the in-person survey at the Schwab IMPACT conference in November 2019 to discern the biggest challenges advisors anticipate this year for both their practices and their clients’ portfolios.
Increasing industry competition from robo-advisors and traditional wealth managers is the second most-cited challenge for their business (22%) this year. “This sentiment among advisors underscores the importance of finding and retaining the right talent to maintain an advantage as competition increases and more advisors are leaving the industry,” the study emphasizes.
The findings suggest that advisors may also be struggling to build the teams necessary to navigate industry disruptions and explore new areas of opportunity for clients, such as environmental, social and governance (ESG), the firm notes.
“With the potential for a correction ahead and a wave of advisors on the cusp of retirement, it’s critical for advisors to identify and nurture talent to help weather potential volatility,” says Julie Genjac, Managing Director, Applied Insights at Hartford Funds. “Both specialized and intrapersonal skills will be at a premium as firms must find new ways to provide value to clients.”
As such, developing expertise in emerging investment trends is one area advisors may want to double down on, the firm notes. For example, despite sustainable investing being a point of focus for the industry, more than half of advisors (54%) do not implement ESG products or investing strategies in their clients’ portfolios.
What’s more, 26% of advisors have little to no confidence that ESG investments can produce strong returns, while 19% of respondents indicate that they are unsure, signifying an opportunity for advisors to learn more about these strategies and the available options for clients, the survey notes.
Impact of Geopolitics
When considering their client portfolios, advisors are primarily concerned about the impact of geopolitics on the market in 2020. Slightly more than a third (34%) believe geopolitical tensions – such as the ongoing foreign trade discussions – will create the biggest investing challenges.
This concern is followed by a potential bear market (23%) and the 2020 U.S. presidential election cycle (20%). Despite their fears of a softening market, fewer than 10% of advisors are concerned about a slowing pipeline of clients.
“Advisors are actively anticipating – and assumedly planning for – the geopolitical events and risks that will impact their clients’ returns in 2020,” notes Genjac. “Often more challenging than safeguarding a portfolio is managing the emotional impulses of investors when volatility strikes. Now is the time for advisors to be proactive in connecting with their clients on the price of panic and building a plan to achieve their long-term financial goals,” she emphasizes.
It's also worth noting that this survey was conducted before the outbreak of the coronavirus, which, according to various reports, appears to have dampened investor sentiment compared to the start of the year.
