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Market action in 2022 isn’t giving clients much reason to cheer, which isn’t surprising when considering stocks and bonds are falling and other assets are disappointing as well.
With equities having spent significant time in a bear market this year and major fixed income benchmarks close to achieving the same dubious distinction, it’s a fact that the 2022 market environment is taking a toll on investors. Advisors are part of that group. In fact, data confirm registered investment advisors (RIAs) are in somber moods today. Nationwide’s eighth annual Advisor Authority survey underscores the beleaguered tone of advisors and clients alike.
“The current macroeconomic environment has created a stressful situation for investors and advisors, leading to a sharp decrease in their optimism. Just 39% of investors are optimistic about their 12-month financial outlook, a 10-percentage point decrease from last year (49%). Similarly, only 48% of advisors and financial professionals are optimistic, a 15-percentage point decrease from 2021 (63%),” according to the survey.
Familiar Foes Dragging on Sentiment
Not surprisingly, advisors and clients are fretting about familiar factors – namely rising market volatility, persistently high inflation and the specter of a recession.
“Volatility, recession fears, inflation and taxes are the top financial concerns contributing to the decline in investor optimism,” adds Nationwide. “More than half (54%) of investors expect increased volatility over the next 12 months, but recession fears are 20 points higher (74%) than volatility worries. This mirrors the level of concern during the height of the COVID-19 pandemic in 2020 when 75% of investors were concerned about a recession. Advisors and financial professionals are even more worried, with 82% concerned about a recession, compared to 77% in 2020.”
Inflation, which was badly misjudged by the Federal Reserve, is weighing on clients’ outlooks. Adding to the problem is the point that many traditional inflation hedges aren’t living up to their reputations this year.
“Investors’ inflation concerns in the next 12 months skyrocketed this year (46% 2022; 29% 2021) as well. Other top financial concerns include taxes (22%) and protecting assets (19%),” adds Nationwide. “Investors also most commonly say that inflation is the leading factor contributing to volatility over the next 12 months (40%). Although more than half of investors expect increased market volatility over the next 12 months, these expectations are at a four-year low (54% 2022; 61% 2021; 61% 2020; 66% 2019).”
Silver Lining for Advisors
While the aforementioned data points are by no means good news, there is some silver lining for advisors in that clients certainly need them now. Perhaps more than ever or at, the very least, more than they have in years.
A variety of data points and studies confirm investors and prospective clients across a broad swath of demographic groups want to work with registered investment advisors (RIAs). And it’s reasonable to surmise that the more turbulent markets are, the more investors value advice and guidance from a trusted professional.
One area for advisors to consider focusing on is retirement planning because, for many clients, that has the element of time on clients’ sides.
“Advisors and financial professionals are counseling clients to contribute more monthly (44%) or the maximum amount (44%) to 401(k)s or employer sponsored defined contribution plans. They are also managing investments more conservatively (43%). One-third of advisors (33%) are considering purchasing or have purchased an annuity for their clients,” concludes Nationwide.
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