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If ever there was a time for advisors to prove their mettle and assuage skittish clients, this it. Actually, that’s been the case for several years now.
The coronavirus pandemic, two election cycles, historically high inflation and eight interest rate increases by the Federal Reserve, among other factors, have clients feeling apprehensive and skittish. Some data points and surveys indicate some investors are feeling downright gloomy. Not surprisingly, advisors and clients are fretting about familiar factors – namely rising market volatility, persistently high inflation and the specter of a recession.
The silver lining with a nervous investor base is those that have advisors usually want to enhance those relationships and those that don’t have advisors are more apt to consider changing that. 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.
Point is advisors are needed in a big way in this environment and data confirm as much.
Recession Concerns Abound
To say the U.S. economy is in a “unique” position is an understatement. By the old definition, a recession already arrived last year, but it didn’t feel like one and employment data remains strong. That is to say there’s doubt about a recession at the moment, but it remains a primary concern for many clients.
Nationwide’s “recent Advisor Authority survey, powered by the Nationwide Retirement Institute®, revealed that four in ten investors believe the U.S. is already in a financial crisis, and three in ten believe we are approaching one,” according to firm.
The survey points out another crucial point for advisors: Just 36% of investors believe they’re currently positioned to survive another financial crisis.
Another opportunity for advisors is establishing and fortifying relationship with older clients, namely Gen X and baby boomers. Those generations have already been through multiple, historical bear markets and while they may be battle-hardened, they don’t want to go it alone through another recession or worse.
“Gen X and Baby Boomer investors have more experience with economic downturns which has conditioned them to proceed with caution. However, more than one-third of investors aged 77 and older feel the current U.S. economic environment is worse than in previous financial crises,” adds Nationwide. “Because of their proximity to retirement, many might not have time to make up for savings loss in a downturn while others could worry their larger nest eggs will be more vulnerable to market swings, prompting them to change or delay their retirement plans.”
Younger generations are also concerned, but not to the extent of Gen X and boomers. That says advisors can be instrumental in navigating a broad swath of clients through tumultuous times.
Putting Planning in the Spotlight
Advisors should help clients remember the old saying “Failure to prepare is preparing to fail.” Translation: Planning and taking preventative measures before a recession sets are meaningful steps and are big reasons why clients work with advisors.
“Both investors and financial professionals are concerned that market volatility will increase over the next 12 months,” concludes Nationwide. “However, you are in a great position to help your clients stick to their long-term plans and not get caught up in the vicious news cycle, reinforcing that those who stick to their plans historically have stronger capital appreciation. You can encourage your clients to resist the urge to make emotional decisions or panic, maintain a diversified portfolio, consider historical market results, and take advantage of opportunities to buy low while others are selling in a falling market.”