- 70% said non-retired clients are down between 1-14%; 91% are down between 1-24%
- 85% said clients are only down gains, not principal
According to the latest survey of 799 financial advisors by InspereX, the vast majority expect markets to rebound in the second half of the year, despite waning confidence in the US economy.
More specifically, 39% of advisors expect a loss of 10%, 37% expect markets to close even on the year, and 12% expect a gain of 10%. However, advisors’ confidence in the US economy dropped 20% since last measured in October 2021.
Of the remaining 12% of respondents, 11% expect a decline of 20% or more, with 1% expecting a return of 20%. When the survey closed on June 10, 2022, the S&P 500 was down approximately 18% on the year.
The majority of advisors (70%) said the average performance of their non-retired clients was down between 1-14%; another 21% said clients are down between 15-24%; just 3% said they were even on the year and only 5% said they were up on the year. Despite market performance, 85% of advisors said their clients are only down gains, not principal.
Notably, 30% of advisors said their clients are talking about delaying retirement due to recent market weakness.
When asked what has surprised advisors most about clients in light of recent market volatility, 33% said “patience.” Furthermore, 69% said their clients are more comfortable with volatility than they were in the past. The good news is, just 11% of advisors said the market downturn has caused friction between them and their clients.
Advisors and clients are on the same page in terms of what they are worried about, citing inflation, market volatility and rising interest rates as their top concerns.
These findings are from the seventh InspereX Pulse Survey, conducted online between June 6-10, 2022, by Red Zone Marketing. The 799 respondents represent advisors from independent broker/dealers, wire houses, banks, and RIAs. InspereX is the tech-driven fixed income and market-linked product distribution and trading firm formed from the merger of Incapital and 280 CapMarkets in July 2021.
“The overwhelming majority of financial advisors we surveyed last year expected to see heightened volatility in 2022, which has seemingly helped them prepare portfolios and clients for the turbulent environment we’re experiencing today,” said Chris Mee, Managing Director, and Head of Market-Linked Products Distribution at InspereX. “While broad market drawdowns can be discouraging and distract clients from their long-term goals, markets like these underscore the importance of the advisors’ role and it is encouraging to see advisors optimistic about the path forward. Advisors’ ongoing success has been driven by providing excellent client service, which continues to lead to referrals as a main driver of new business.”
New Challenges Call for New Solutions: What Are Advisors Doing to Reduce Client Worry?
When asked how they are positioning portfolios for income-oriented clients, 100% of advisors said they are considering alternatives; 36% said they are introducing clients to individual bonds for protection of principal and predictable income, subject to the credit risk if the issuer; 29% said they are using individual municipal bonds; and 28% said they were avoiding bond ETFs and funds where there is no guaranteed return on principal.
The Practice: Office Operations; Client Communications; Attracting New Business
Almost half (46%) of advisors said in-person meetings are now the main way they are meeting with clients, while 33% said they are predominately meeting via phone and 21% are meeting virtually (Zoom, Skype, WebEx, etc.) – the latter represents a decline from 32% when asked in October 2021.
For advisors embracing virtual prospect meetings, 23% said they have closed significant new business, while 31% said they have opened a few new accounts, but not as many as they had hoped.
Two-thirds of advisors surveyed (66%) said the majority of their team is back full-time in the office, with 22% saying they are operating permanently on a hybrid schedule. Notably, 6% of advisors said their team is permanently fully virtual.
As a result of recent market volatility, 34% of advisors said they are meeting with clients more often face-to-face. In addition, 37% of advisors said the recent downturn in markets has led to a large number of new client prospects.
The top six ways advisors are growing their business in 2022 are:
- Referrals without asking
- Asking for referrals from clients and strategic alliances
- In-person networking
- Email marketing
- Email newsletter to prospects
- Live client appreciation events
In identifying the barriers to success, advisors said market volatility, inflation and the implications of geopolitical uncertainty were key challenges. In contrast, the top three barriers cited in October 2021 were changing legislation, the presidential administration, and repeated shutdowns due to the resurgence of COVID-19.
“As we continue to emerge from the global pandemic, it’s fascinating to monitor how advisors have repositioned their practices for the long term,” Mr. Mee said. “Despite all that has changed over the past few years, the power of the referral remains strong, and this trend underscores advisors’ resilience and commitment to their clients’ investment objectives. Regardless of how your practice is positioned, a customized approach to your client needs should remain paramount. However, as face-to-face interaction continues to normalize, I would expect in-person networking to trend higher on the list of effective marketing strategies.”
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