Financial advisors are exposed to numerous risks to their investment performance in 2018 — from growing geopolitical uncertainty to rising interest rates to inflation.
However, according to research released by Natixis Investment Managers, managing the emotional reactions of clients could be their greatest challenge.
Natixis’ Center for Investor Insight surveyed 300 U.S. financial professionals, which includes wirehouse advisors, registered investment advisors and independent brokers and dealers, and found that few believe investors are ready for a return to more normal market ebbs and flows.
Nearly half (46%) of professionals reported that their clients reacted emotionally to recent market movements. Moreover, eight in 10 (82%) believe the prolonged bull market has made investors complacent about risk, and they fear this could translate into moves driven by emotion and panic once volatility strikes again.
According to Dave Goodsell, executive director of Natixis Investment Managers’ Center for Investor Insight, advisors are finding themselves in the need of being able to look at their business from both sides of the brain.
“On the left hand side, markets are becoming more complicated,” he explained to ThinkAdvisor. “The way you calculate risk is changing. So you really have to have those skills in mind: How do I look at the markets? How do I factor in where the risks are? How do I position portfolios for this?”