Investors are still living in a "post-trust era," according to a Dec. 21 report from the Insured Retirement Institute, headed by Cathy Weatherford (left), but they are beginning to consider a return to the markets.
The report, conducted by Michael Maslansky, CEO of Maslansky, Luntz and Partners, is based on results from an instant response dial test of 24 retirees and pre-retirees at IRI's 2010 Annual Meeting.
"The anger toward the financial industry has started to recede as memories of the bailouts and bonuses fade. Investors have begun to move to a “recovery” mentality, and are ready to start considering more investing and income-generation techniques," write the report authors.
The report describes four factors that define the recovery mentality.
- Investors are thinking about themselves. "They feel they’ve worked hard and have done their part."
- Investors are making emotional decisions, not rational ones. As the authors write, "this is no more a rational discussion than equities are a rational market," and advisors need to understand their clients' feelings before they can approach them with facts.
- There's a gap between the education advisors are providing their clients, and what clients actually understand. Advisors need to find the "right language and the right techniques to ensure that your effort is not lost on your clients and prospects so that they will 'feel' like they are getting what you are giving."
- Skeptical clients believe with good news comes the potential for bad news. "And that means that even astrong recovery in the market won’t equate to a recovery of trust."
Investors are skeptical of what their advisors are telling them, according to the report, believing instead that advisors are working for the firm and not their clients. Discussions about market trends or historical behavior only make them more suspicious. Investors still want a relationship with their advisors, the report notes, but they will depend more on their own research than their advisors' recommendations until trust is rebuilt.
The problem for advisors is that even with more attention, clients don't necessarily see a greater value. The report found that most respondents said they were having more conversations with their advisors, but that they don't see much added value in them. Investors want to consider new investment strategies instead of relying solely on "the same old strategies."