Volatility is just part of the investing game, according to an MFS Investing Sentiment Survey. The firm found 60% of young investors feel the “ups and downs” the market has experienced recently are normal, compared with 54% of all respondents.
Although it may be normal, young investors are still concerned. Thirty-seven percent said they’ll “never feel comfortable investing in the stock market,” compared with 25% of all investors.
“A majority of younger investors feel the volatility of the stock market is normal but more than one-third behave as if they are scared by it, keeping 33% of their assets in cash,” William Finnegan, senior managing director of global retail marketing at MFS, said in a statement. “Advisors recognizing this contradiction between sentiment and behavior have a unique opportunity to help clients find an asset allocation they can be comfortable with—especially during volatile times—that keeps them on track toward their long-term goals.”
The findings were released Wednesday from a study conducted in February among 974 adults with $100,000 or more in household investable assets and 621 licensed financial advisors (either FINRA or SEC) who have been licensed for at least three years with $500,000 or more in annual mutual fund sales. The first wave of findings, released in April, focused on clients’ fears over inflation.
Finnegan added that advisors can keep their clients on track focusing on what keeps them up at night rather than discussing specific investments, “which we know many investors believe to be overly complex in the first place.”
In fact, the survey found that investors are overwhelmed and intimidated by the complexity of investment products, as well as the sheer number of choices available to them. The initial results, released on May 7, show 40% of investors think investment products are too complex. More than one-third say they feel overwhelmed by the number of choices available.
That perplexity has led to a rise in the need for financial advice. One-quarter of investors said their need for professional advice has increased in the past 12 months. Thirty-six percent of investors say they’re asking for more information from their advisor these days, and 81% say they expect their advisor to keep them up to date on new or innovative products.
“Investors have a ton of information at their fingertips, but that is not knowledge or perspective. That is most likely why the need for professional advice is on the rise,” William Finnegan, senior managing director of global retail marketing for MFS, said in a statement. “They are stymied by complexity and want a financial advisor to provide insight into and knowledge from the information swirling around them.” Young investors are especially in need of help. More than half of Gen Y investors said investment products are too complex, and 57% are likely to think the information they get online is just as good as what they would get from an advisor. Thirty-nine percent of Gen X investors said investment products are too difficult to understand, and 47% agreed with Gen Y that going to an advisor isn’t necessarily better than going online for information.
Forty-five percent of Gen Y and Gen X investors say their need for advice has increased. Gen Y investors are asking for information more frequently than their Gen X counterparts; 63% said the amount of information they have asked for from their financial advisor has increased, compared with 44% of Gen X.
“Investors indicate a strong inclination to maintain at least some control over their financial picture, and we should encourage high levels of involvement,” Finnegan said. “However, with that involvement comes exposure to complex ideas that financial advisors are better positioned to address. Investors are acknowledging the need for more professional investment advice to both validate their thinking and to answer their complicated questions.”