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Advisors Are Growing as Pessimistic as Their Clients: MFS Investment Survey

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Financial advisors have grown “decidedly more pessimistic” about the U.S. economy in 2011, closing the gap that existed earlier in the year between advisors and their clients, according to a new survey released Wednesday by MFS Investment Management.

Boston-based MFS held the survey in October and September, asking both advisors and investors how they felt about the economy, and 27% of advisors said they were pessimistic about the U.S. economy over the next five years. That compares to only 7% in February.

As for investors, 53% are pessimistic about the U.S. economy, up from 37% in February, according to the online survey of 929 individual investors with more than $100,000 in investable household assets and 644 licensed advisors with at least $500,000 or more in annual mutual fund sales. MFS sponsored the survey, conducted by independent research firm Research Collaborative.

“The wall of worry was there in February, but this fall it came into full focus for advisors just how big that wall was,” said William Finnegan, senior managing director and head of U.S. marketing for MFS, in an interview with AdvisorOne in New York. “The investor and the advisor are now much more closely aligned in their opinions.”

The willingness to take on risk, both in domestic and international investments, has declined since February, said Finnegan. In particular, he noted a surprising barbell of shared pessimistic conservatism between Generation Y investors under the age of 31 and baby boomer investors between the ages of 46 to 64.

Calling Gen Y investors “recession babies,” Finnegan said that many young people moved in with their parents during the financial crisis and watched them struggle with layoffs, unemployment, the credit crunch and the housing market crash.

As a result, he said, investors old and young have become so risk-averse that advisors now have the job of communicating with clients more about the dangers of putting too much of their savings into cash.

“Advisors have an opportunity to tell Gen Y clients and prospects about how to invest for their retirement years, which are 30 to 35 years away,” Finnegan said. “Recession babies have a tendency to think of themselves as savers, rather than as investors, but you can be too conservative as much as too aggressive.”

Other results from the MFS survey:

  • Only 45% of advisors surveyed believe U.S. equities are an excellent or very good place to invest over the next 12 months, down from 72% in February. Similarly, advisors dropped from 60% to 29% when asked about international equities.
  • 53% of investors are pessimistic about the U.S. economy, up from 37% in February.
  • Overall, investors say 27% of their investable assets are in cash. And younger investors lead the pack, with Generation Y indicating a 33% allocation to cash, up from 30% in February.
  • 69% of investors expect their financial advisor to contact them regularly during times of market volatility.

Read about MFS Chairman Emeritus Bob Pozen’s argument for a $5 trillion plan to cut U.S. debt at


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