July 23, 2012

European Crisis Biggest Factor When Advising Clients: Surveys

Kasina: Clients should refrain from making ‘wholesale’ portfolio changes; OppenheimerFunds: advisors favor emerging-market bond funds and dividend-paying equities

Advisors are telling clients to stay the course and refrain from making “wholesale changes” to their portfolios despite economic volatility, a recent poll by kasina has found.

And given the current low-yield environment, advisors are increasingly likely to recommend less traditional income-producing assets for clients, with their favored products being emerging-market bond funds and dividend-paying equities, according to a survey released Monday by OppeneheimerFunds.

Kasina, a consultant and strategic advisor to the asset management industry, recently polled 2,300 advisors in its biannual FA Vision survey on their top concerns and recommended courses of action. The study found that nearly half favored “staying the course” over significant reallocation in alternatives, equities, fixed income and cash.

Click to enlarge. Source: kasina and HorsesmouthAdvisors were asked which of the following events presented the biggest possible impact to their clients’ portfolios: the European debt crisis, oil prices, the 2012 U.S. presidential election, unemployment or another event.

Close to half (47%) of the advisors polled by kasina said that the debt crisis in Europe would have the biggest impact. However, kasina notes those advisors not recommending change “stressed that their portfolios were already positioned to avoid responding to short-term bumps in the road.”

Fifty-nine percent of the advisors polled in the OppenheimerFunds study agreed that the ongoing European debt crisis is the most important issue impacting the financial advice they give to clients. Forty-three percent of the advisors polled by OppenheimerFunds said they have reduced exposure to international bonds, while 41% have reduced exposure to international equities since the eurozone crisis began.

Click to enlarge. Source: kasina and HorsesmouthAdvisors were also given a choice as to which action they recommended to clients in the face of that event: increase alternatives, increase cash, increase equities, increase fixed income, or no change. Close to half of those polled (42%) said they recommended no change to their clients’ portfolios.

“The survey clearly tells us that financial advisors are advocating for risk management and long-term returns in the face of volatility,” said Steven Miyao, CEO of kasina, in a statement. “While many financial advisors indicated that the eurozone issues continue to be the largest overhang, most are committed to building long-term platforms that rise above the short-term noise we’re currently experiencing.”

The OppenheimerFunds survey, conducted on June 20 and 21 at the 2012 Morningstar Investment Conference in Chicago, examined the investment challenges and opportunities advisors see when managing portfolios for their increasingly risk-averse clients.

When it comes to finding income in a low-interest-rate environment, the 107 advisors polled in the OppenheimerFunds survey found that 84% of advisors are more likely today to recommend dividing-paying equities and more than three-quarters (76% ) are willing to recommend emerging-market bonds or related bond funds over other asset classes.

Half (50%) of the advisors polled said the best way to get emerging-market equity exposure is through funds investing directly in emerging-market companies.

Fifty-nine percent of advisors also said they are seeing clients become more risk-averse, with increased interest in fixed-income investments.

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