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Advisors Urge Clients to Stay the Course

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Despite a rollercoaster ride for the S&P 500 in October, financial advisors are overwhelmingly urging clients to stay the course and keep their current asset allocation intact, according to new survey results from Ariel Investments.

More than eight in 10 advisors surveyed are encouraging clients to stick to their investment plan. While 7% see the recent market volatility as a buying opportunity and advise adding to equity exposure, 10% are advising clients to trim equity exposure.

“During the financial crisis of 10 years ago, those that remained invested in stocks and did not panic as markets became more turbulent, were generally handsomely rewarded for their conviction and patience,” Charlie Bobrinskoy, head of investment group and portfolio manager at Ariel Investments, said in a statement. “It is encouraging to see that advisors and their clients acknowledge this and are sticking with their investment plans, despite the recent surge in volatility.”

According to the survey, investors are largely heeding the advice of their advisors despite mounting concerns of another market downturn.

Nearly three-quarters (70%) of clients are telling their advisors that they are concerned about recent market volatility, but willing to keep their asset allocation intact, according to the advisors surveyed. Additionally, 9% of investors tell their advisors they view the recent market volatility as a buying opportunity and want to add equities to their portfolios.

Compared to 10 years ago, during the financial crisis, 55% of advisors say their clients today are less willing to take on risk and more concerned with avoiding loss. This compares to 45% that say their clients are more willing to take on risk to earn a greater return.

According to Bobrinskoy, the nearly 50/50 split in how clients are thinking about risk today has much to do with their unique experience during and after the crisis.

“Depending on how they responded during the depths of the financial crisis, investors have a different take on risk today,” he said in a statement. “Relatively few were adding exposure to equities during the crisis, but those that had the courage to do so have generally done very well over the past 10 years. Those that stayed the course and stuck to their investment plans also have experienced nice gains.”

The survey also finds that advisors are more interested in value for 2019.

Of the 99% of advisors that plan to remain invested in equities in 2019, 70% expect to increase their allocation to value stocks. This is likely because value stocks, which are typically more likely to lag growth stocks in a sustained bull market, are generally considered less volatile than growth companies, according to Ariel.

Ariel Investments conducted a proprietary survey of conference attendees at the Schwab Impact 2018 conference from Oct. 28-31 in Washington. Survey respondents included financial advisors nationwide. Percentages are based on 105 responses.

— Check out Expect Fewer Recessions but Weaker Recoveries: J.P. Morgan on ThinkAdvisor.


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