Financial advisors are vastly more optimistic about 2011 than their clients. A survey released by SEI on Thursday found 30% of advisors said they were optimistic about 2011; just 3% said their clients were.
Advisors were confident about the stock market; 60% said it would increase by more than 7%. Still, 64% of advisors said there is at least a 50% chance of a bond bubble burst. Almost one-third said the best way to solve the federal deficit is to reduce current stimulus plans, and 28% said the government should "revisit" health care reform. Just 16% said the retirement age should be increased.
"The markets have improved and the consensus in the industry is that things will continue to look up. The challenge for advisors now, is how best to grow their business,” Wayne Withrow, executive vice president and SEI Advisor Network business unit leader, said in a press release.
In an interview with AdvisorOne, Withrow, (left), said investors are still reeling from what happened in 2008 and this "lingering fear" is preventing them from feeling optimistic about their financial futures.
"Historically," Withrow said, "clients always want to know if they have enough for retirement. In this survey, though, three issues emerged. One was if they have enough, but they're also worried about the impact of the federal deficit, and they're worried about another market correction."
"These three factors are equally important, and until they get over that, it'll be tough for them to feel optimistic."
Advisors are optimistic about their practices in 2011. While acknowledging 2010 was a difficult year, they named several positives; uncertain markets allowed advisors to strengthen relationships with their clients, to "show their real value," and to examine their business practices. Thirty-two percent of advisors said their goal for 2011 was to "proactively acquire clients using new initiatives." One-quarter said they would focus on their centers of influence, and 21% said they would continue to work on their referral process. Fifty-five percent of advisors said referrals were the most important aspect in growing their business.
Communication is a top priority for advisors. Over three-quarters (77%) said the need for better communication was increasing, compared with 16% who said more reporting was the biggest need, and 7% who said research was their greatest need. Forty-two percent of advisors said they communicated more with their clients in 2010 than they did in 2011, and 41% said they plan to use in-person meetings more frequently this year.
The good news is that advisors appear to know what they have to do to address their clients' fears and are doing it, Withrow says. "It's an education issue," he said. "The number 1 communication topic is investor education. To have confidence, investors need to have the education and be knowledgeable enough to feel comfortable. Advisors understand the issue and are responding appropriately."
Mike Ferman, a financial advisor with Rubinbrown Advisors in St. Louis, Mo., agrees about the importance of communication.
"My key job is to manage expectations," he said in an interview. "If you do that correctly, clients focus on the long-term, instead of worrying about short-term volatility."