Advisor Top-of-Mind Index: Volatility, Election, Fed

With the presidential and congressional elections just weeks away, Eaton Vance in September asked 1,002 financial advisors in an online survey what issues were on their minds.

Protecting wealth from market volatility remained the chief concern on the firm’s Advisor Top-of-Mind Index for the fifth consecutive quarter, but dropped from 129.7 to 116.4 on the scale, Eaton Vance reported Thursday.

Although 48% of advisors expressed concerns about generating income over the past year, this issue’s index rating fell slightly quarter on quarter to 114.0. The importance of reducing taxes stayed flat from the third to the fourth quarter, scoring 71.7.

Nearly all advisors said they expected the upcoming election to affect markets, with 57% believing the effect would be negative. They predicted that the Federal Reserve’s decision about interest rates would be the main driver of market volatility over the next six months, closely followed by the presidential election results and the pace of economic growth.

Thirty-nine percent of advisors anticipated that interest rates would rise before year-end, while another 41% expected the Fed to act early next year.

“Macro events have taken center stage in advisors’ minds this quarter and caused a lot of uncertainty,” John Moninger, Eaton Vance’s managing director of retail sales, said in a statement. “Uncertainty is unsettling, but advisors can help clients navigate through periods of market volatility by discussing long-term goals and reviewing the tactical plans in place to help meet or exceed those goals.”

In the current politically charged environment, 76% of advisors said their clients continued to worry about volatility, and 69% reported that their clients considered volatility a risk rather than an opportunity.

Volatility was on advisors’ minds as well. Fifty-five percent said they associated the term “volatility” with uncertainty. However, only 12% associated the term with losing money.

Eaton Vance’s Advisor Top-of-Mind Index uses a methodology similar that of the U.S. Consumer Confidence Index, with which it affirmed it has no affiliation. It calculates a weighted average of current perceptions (40% of the index) and what advisors think about the trends (60% of the index). The index set a baseline average of 100 for April 2014.

Advisor and Clients Talking Politics

Nearly all advisors surveyed acknowledged they were talking about politics with their clients. Thirty-nine percent said their clients raised the topic, 30% said they themselves did so, and 26% reported that politics came up as side conversations.

The poll found that 28% of female advisors saw the election as having a significant influence on the U.S. stock market, compared with 20% of their male counterparts. As a result, 24% of female respondents listed the election as their most important consideration, compared with 15% of males.

A majority of advisors said they would like to see the election lead to changes in government policy, with 51% preferring moderate changes, 40% big changes and only 10% comfortable with current policies.