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Advisors more optimistic about markets than their clients

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Financial advisors are far more optimistic than the average investor about the performance of capital markets over the next three years, new research show.

Russell Investments, Seattle, discloses this finding in a survey of U.S.-based financial advisors. The company received 479 responses from advisors representing 115 financial service firms.

The report finds that nearly three-quarters of advisors (72 percent) say they are optimistic about the capital markets over the next three years. Just one in five (21 percent) say that clients share this view.

The optimism gap between advisor and client nonetheless represents an improvement over last year, the report adds. In 2012, 65 percent of advisors were optimistic and 16 percent indicated their clients were optimistic as well.

The survey arrives at these optimism levels using a Sentiment Index, which accounts for both those who are positive and those who are negative about capital markets over the next three years. The score is derived by subtracting the percentage of a group that is pessimistic from the percentage of the group that is positive.

According to index, the group most pessimistic about capital markets over the next three years is the Silent Generation, which encompasses those over the age of 66.  Individuals in this group registered a negative 27 percent Index score.

The other three generations surveyed—baby boomers (ages 48-66), Gen X (ages 30-37) and Gen Y (below age 30)—all registered positive index scores. These were 4 percent (boomers), 25 percent (Gen Y) and 37 percent (Gen X).

Concerns about government policy are the chief focus of conversation between advisors and clients, the survey reports. More than six in three advisors (63 percent) reported that clients initiated a conversation on this topic, while 25 percent of advisors initiated a conversation on this topic.

Other popular topics of conversation between advisors and clients during the past three months included:

Portfolio rebalancing: Thirty-eight percent of advisors reported they initiated the conversation and 9 percent of advisors reported that clients initiated the conversation;

Generating income from a portfolio (35 percent and 32 percent, respectively);

Portfolio investment performance (30 percent and 21 percent, respectively);

Tax implications (27 percent each);

Market volatility (25 percent and 34 percent, respectively); and

Running out of money in retirement (19 percent and 27 percent, respectively).


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