Managing market volatility continues to be advisors’ top concern according to new research.
Eaton Vance Distributors discloses this finding in its “Advisor Top-of-Mind Index (ATOMIX), a quarterly survey of 1,000 U.S. financial advisors. The index calculates a weighted average of current perceptions (40 percent of the index) and what advisors think about the trends (60 percent of the index).
The Index set a baseline average of 100 for April 2014. Each component measured is tracked quarterly to illustrate changes in advisor perceptions and changes in trends over time.
The top 4 advisor concerns identified in the report include:
Volatility scored 129.7 on the ATOMIX, the highest ranking of any concern since inception and the top concern for financial advisors for the fourth consecutive quarter.
Generating income for clients ranked second at 122.8, a significant jump from 108.1 in the second quarter.
Growing wealth through capital appreciation ranked 103.1, a dramatic increase from 83.0 in Q2.
Reducing tax exposure ranked 72.2, reflecting a slight increase from 67.3 in Q2.
Investor concerns about the markets remain elevated as well with four out of five advisors (82 percent) reporting their clients are motivated by fear when making investment decisions, the highest percentage to date.
“The surprise Brexit outcome, ongoing political uncertainty, the possibility of more rate hikes and a sluggish U.S. economy has thrown many advisors and their clients into a state of heightened anxiety,” says John Moninger, managing director of retail sales at Eaton Vance. “While unsettling, this environment creates an opportunity for advisors to calm investors’ fears, discuss the opportunities that emerge from market volatility and reaffirm long-term investment plans.”
Client communication remains a priority. In the wake of the Brexit vote, 67 percent of advisors proactively contacted clients to discuss long-term strategies and potential opportunities
Despite increased anxiety about the markets, there is little consensus among advisors about what to expect in the second half of 2016. Close to half of advisors surveyed (45 percent) are bullish on U.S. equities over the next quarter, with 17 percent reporting a bearish attitude and 38 percent currently undecided. When asked about a recession, 54 percent believe there is a low chance, 38 percent report a moderate chance and eight percent say there is a high likelihood of a late 2016 recession.
The upcoming U.S. presidential election is top-of-mind for advisors. Ninety-one percent of advisors are watching the upcoming race, but they are split on its potential impact. While 90 percent agree the election will affect markets, 45 percent believe the impact will be positive and 55 percent negative.
Thirty-nine percent of advisors believe it’s too early to consider the impact of the upcoming election on tax strategy. Only 12 percent of advisors believe it will have major repercussions on their business.
Generating Income in a low-yield environment
With over half (52 percent) of advisors reporting that generating income increased in importance over the past year, finding consistent sources of yield for clients remains a key priority for advisors.