Many U.S. financial advisors, surveyed by Fidelity Investments, said they were anticipating a rise in interest rates, while at the same time they focused on how to ensure a steady income stream for their clients in the current low interest rate environment.
Results of Fidelity’s fourth quarter Advisor Investment Pulse, released Wednesday, were based on a poll of 250 advisors seeking to capture the main investment topics on their minds.
Besides interest rate concerns, the poll showed that advisors continued to focus on market volatility, their next biggest concern.
Scott Couto, president of Fidelity Financial Advisor Solutions, said the prospect of rising interest rates had been a major area of focus for more than a year. But he offered several suggestions for advisors.
Couto suggested that advisors look at how fixed income can play a crucial role in their clients’ portfolios, particularly during periods of volatility and continued uncertainty over interest rates.
Interest rates, he said, may settle at relatively low levels, and for a longer time than many predict.
He explained that the global macro environment remained uncertain, and bond yields outside the U.S. remained low. And no extraordinary pressure exists for interest rates to rise rapidly.
Couto also pointed out that treasuries, mortgages and investment-grade corporate bonds, which make up most core bond funds, were among the only assets with negative correlation to equity returns, thus helping to provide diversification in a portfolio.
Core bond funds also offer principal protection and meet an investor’s need for income, making them a good choice for clients’ portfolios.