Advisors See Positive but Weaker Stock Returns in 2021

A majority of financial advisors reported positive but modest expectations for equity market returns in 2021, according to a survey released Thursday by Incapital.

Forty-nine percent of advisors said equity markets would rise between 5% and 10% this year, and 25% forecast returns of 0% to 5%, well below those of last year. 

Sixteen percent of advisors were more bullish, expecting 2021 equity returns up 10% to 15% and 2% forecasting gains of up to 20% or more. Only 8% said they expected a down market this year. 

Incapital’s survey was conducted online via Qualtrics by Red Zone Marketing between Dec. 8 and Dec. 14 among 396 financial professionals from more than 50 broker-dealers and RIAs.

The vast majority of advisors surveyed foresaw the possibility for multiple equity market corrections in 2021. 

Among other findings, 93% said value investing could continue its comeback this year. In addition, 57% forecast rates on the 10-year Treasury to come in at 1% to 2%, while 38% said between 0% and 1%, and 5% said above 2%.

“Given the enormous amount of uncertainty and hardship from COVID-19 and other factors in 2020, it looks like advisors expect the equity market to slow down and catch its breath in 2021,” Chris Mee, Incapital’s head of wealth management solutions distribution, said in a statement. “If the possibility of multiple corrections comes true, it could be a year of more pain than gain in equities.” 

In this environment, risk management is essential for investors to stay invested to capture whatever gains may come, Mee said. 

The Pandemic’s Effect on Advisor Business

Sixty-nine percent of advisors reported that their revenue in 2020 was on par with that of 2019, while 25% reported an increase. Only 6% said their revenue had dropped. 

Advisors’ business picked up as the difficult year progressed. Asked in June whether they expected to serve more households in 2020, 38% said yes; by September that number had climbed to 47%, and by December it was up to 52%. 

Of those that expected to serve more clients, 77% said they had added six or more new households, including 47% who said they had added 10 or more. 

Three in 10 advisors said they received more referrals in 2020 than in 2019, while half received about the same and 1 in 5 received fewer referrals. 

Here’s where their new business came from in 2020:

• Referrals without asking: 33%
• Asking for referrals from clients and strategic alliances: 23%
• Email campaigns: 12%
• Virtual education seminars: 10%
• LinkedIn prospecting: 7%.

How Advisors’ Work Is Changing

Three in five advisors said they planned, or may consider, a permanent virtual/in-office hybrid arrangement for their staff moving forward. 

Fifty-five percent thought their teams were — or might be — more productive working from home. As to the benefits of doing so, 65% of advisors said they had time to increase communications with clients, with 49% spending time improving how they served clients. 

An additional 30% said they would reduce their office space, or consider doing so, and 16% said they may eliminate office space altogether.

Asked whether they worried that clients might disapprove of their working virtually, 67% said they are not concerned. 

Forty-two percent of survey respondents said they had returned to their offices by December, while 34% expected to return in the first half and 11% in the second half. Thirteen percent did not expect to return to their offices at all.

What about meeting with clients in person/? Half of the advisors surveyed said they would wait until the second half to do so. Only 12% of advisors said they were currently having in-person meetings with clients, and 38% said they would start face-to-face meetings in the first half. 

In terms of prospecting, nearly all advisors in the survey said they were comfortable meeting with prospects virtually, and two-thirds said prospecting and selling could be done effectively via virtual meetings. 

Forty-five percent of advisors said they had had six or more virtual prospecting meetings in 2020, with a success rate of 22%. 

“Working through the crisis is teaching us all a lot of lessons about how to serve clients,” Mee said. “Our focus first and foremost is on the safety of our clients and teams. 

“While we are all eager to get back to normal, the client experience lessons we learn from this difficult time will change the way we work forever.” 

— Check out How Advisors Can Thrive in a Virtual Environment on ThinkAdvisor.