Clients Are More Recession-Proof Today Than in 2008: Advisor Survey

Six in 10 RIAs and fee-based financial advisors in a new survey maintain that investors today are better prepared to withstand a future market downturn, in part because of a shift in their mindset in the decade since the financial crisis, Nationwide Advisory Solutions reported Tuesday.

Seventy-four percent of RIAs and fee-based advisors in the poll said investors were likelier to work with a financial advisor today that they were before the crisis. They were also more likely to adhere to an advisor’s guidance and be more open about their financial situation and willing to create and stick to a financial plan.

Sixty percent of advisors reported that investors were also likelier to ask about advice that is in their best interest or aligned with a fiduciary standard.

“Even a decade after the 2008 financial crisis, the most significant market downturn since the Great Depression has had a lasting impact on investors’ concerns about minimizing risk and protecting their assets, as well as their desire for guaranteed income in retirement,” Craig Hawley, head of Nationwide Advisory Solutions, said in a statement.

Advisors in the survey characterized current investors’ concerns and priorities as follows:

More concerned about a future downturn: 84%
More concerned about market volatility: 79%
More risk averse: 67%
Likelier to focus on product costs: 56%
Likelier to ask about how advisors are compensated for their advice: 51%

The poll was conducted online within the U.S. in August among 372 RIAs and fee-based financial advisors drawn from Nationwide Advisory Solutions’ internal database of financial advisor partners.

Advisors’ Shifts

Seventy-nine percent of RIAs and fee-based advisors reported that they had increased their proactive communication with clients about market conditions, and 60% said they had become more proactive about communicating their compensation model.

Fifty-seven percent of advisors also said they had increased their focus on an independent fee-based approach to managing their practice and serving their clients.

“RIAs and fee-based advisors have adapted to the needs of the post-financial crisis investor by adopting a more holistic approach, aligning the products and tools they leverage to meet investors’ concerns and proactively communicating about market risk and movement,” Hawley said.

The research showed that 73% of RIAs and fee-based advisors had increased their focus on holistic financial planning for clients following the financial crisis. A majority said clients were more likely today than before 2008 to seek guaranteed retirement income and guaranteed downside protection in order to hedge against market risks.

As a result, advisors in the survey said they had increased their use of specific investment products in order to meet investors’ retirement income goals:

Dividend-yielding stocks: 56%
Yield-generating ETFs: 41%
Variable annuities with guaranteed living benefits: 37%

To hedge against market risk, the top three products they said they were using more since 2008 were liquid alternatives (45%), fixed indexed annuities (43%) and fixed annuities (31%).

Although advisors in the poll agreed that today’s investors in general were better prepared for future downturn than before 2008, 28% considered baby boomers as best-prepared to handle a downturn.

In their effort to prepare investors to cope with future down markets, 63% of advisors said they were prioritizing educating clients about market cycles, 57% were focusing on holistic financial planning and 28% were adding annuities to provide both guaranteed income and guaranteed downside protection.

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