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Financial advisors appear to be significantly more optimistic about the capital markets than their clients.
According to the Financial Professional Outlook (FPO), a quarterly survey of U.S. financial advisors by Russell Investments, only 7% of advisors believe their clients are optimistic about the capital markets over the next three years. This assessment is in stark contrast with the advisors' own outlook — 59% of advisors are optimistic over that same period of time.
Commenting on the findings, Phill Rogerson, managing director, consulting services for Russell's Private Client Services business, said: "Advisors know that the global financial crisis has left many of their clients fatigued, jaded and distrustful. That skepticism means advisors must now work harder to rebuild their clients' trust in the capital markets. That trust is of paramount importance because most individual investors will almost certainly fail to achieve financial security in retirement unless they choose to engage in a sensible savings and investment plan."
Advisors believe that their clients' lack of confidence in the markets has also become a major concern as their clients consider whether they will be able to achieve their financial goals. Seventy-eight percent (78%) of financial advisors responding to the latest survey say that clients see economic uncertainty (slow economic growth) as an impediment to reaching their financial goals. Sixty-one percent (61%) think that market volatility concerns their clients.
Advisors have a different perspective on where the obstacles lie for their clients. Sixty percent (60%) responding to the survey say that what concerns them the most is clients underfunding their retirement accounts. Fifty-four percent (54%) of advisors also pointed to the federal budget deficit as a prominent concern.
"Advisors see challenges both in how their clients approach financial planning and in the larger economic environment. Our recommendation is for advisors to encourage their clients to focus on what is within their control and view the present situation in a broader time horizon," said Rogerson. "Advisors can take action to rebuild client confidence in the markets by having the right conversations to address fears and focus on the levers you can control — spending, income and investment."
Russell provides advisors with actionable tools and information to help facilitate conversations with clients in the current market environment via its Helping Advisors website.
Advisors say that one third of clients now changing plans to achieve or maintain retirement goals
Advisors responding to the survey indicate that about a third (34%) of their clients who are retired or near retirement have changed their plans in order to maintain or achieve their retirement goals since the financial crisis. As a result, 69% of advisors say that those clients making changes are either working longer or going back to work. Sixty-two percent (62%) of advisors believe that clients are downsizing their expected standard of living in retirement in order to decrease expenses.
Interestingly, while a majority of advisors (56%) say that clients making changes to their retirement plans have altered their investment strategy, only 33% indicate that clients are increasing their savings rates.
"Many investors are facing difficult decisions right now, and clients need their advisors to be partners in building financial security for retirement," said Rogerson. "More than ever, financial advisors must help their clients answer the central retirement questions: Are you adequately funded? Are you appropriately invested to meet long-term life goals? The tough conversations are the ones that need to be had right now."
More about Russell's Financial Professional Outlook
More information about the FPO, including a video and a full report of findings can be found at: www.russell.com/Helping-Advisors/YourBusiness/FinancialProfessionalOutlook.asp.
