Advisors Expect Second-Half Market Upturn Despite Falling Economic Confidence: Survey

Nine in 10 financial advisors in a new survey expect markets to rebound at least partially in the second half, despite waning confidence in the U.S. economy. The findings come from a recent survey from InspereX, the tech-driven fixed income and market-linked product distribution and trading firm formed from the merger of Incapital and 280 CapMarkets in July 2021.

Thirty-nine percent of advisors surveyed said they expect a loss of 10% in 2022; 37% expect markets to close even; and 12% expect a gain of 10%. When the survey closed on June 10, the S&P 500 was down approximately 18% on the year.

Of the remaining 12% of respondents, 11% expect a decline of 20% or more, and 1% a return of 20%.

The survey found that advisors’ confidence in the U.S. economy has dropped 20% since it was last measured in October. Both advisors and their clients are worried about inflation, market volatility and rising interest rates.

Seventy percent of advisors reported that their non-retired clients’ average performance was down between 1% and 14%; another 21% said clients were down between 15% and 24%. Three percent said their clients were even on the year, and only 5% said clients were up on the year.

Despite the dismal market performance, 85% of advisors reported that their clients are down only gains, not principal.

Nearly a third of advisors said their clients are talking about delaying retirement because of recent market weakness.

Asked what has surprised them most about clients in light of recent market volatility, 33% of advisors said “patience.” Sixty-nine percent said their clients are more comfortable with volatility than they were in the past.

Only 11% of advisors reported that the market downturn has caused friction between them and their clients.

All advisors in the survey said they are considering alternatives for their income-oriented clients. Thirty-six percent are introducing clients to individual bonds for protection of principal and predictable income, subject to the credit risk of the issuer; 29% are using individual municipal bonds; and 28% are avoiding bond ETFs and funds where there is no guaranteed return on principal.

“The overwhelming majority of financial advisors we surveyed last year expected to see heightened volatility in 2022, which has seemingly helped them prepare portfolios and clients for the turbulent environment we’re experiencing today,” Chris Mee, head of market-linked products distribution at InspereX, said in a statement.

“While broad market drawdowns can be discouraging and distract clients from their long-term goals, markets like these underscore the importance of the advisors’ role and it is encouraging to see advisors optimistic about the path forward.”

Red Zone Marketing conducted the online survey in early June among 799 advisors from independent broker-dealers, wirehouses, banks and RIAs.

Meetings & Management

Forty-six percent of advisors said in-person meetings are now the main way they meet with clients, while 33% are predominately doing so via phone and 21% are meeting virtually — InspereX said the use of Zoom, Skype and the like is down from 32% in October.

For advisors who embrace virtual prospect meetings, 23% said they have closed significant new business, while 31% said they have opened a few new accounts, but not as many as they had hoped.

Two-thirds of advisors surveyed said the majority of their team is back full-time in the office; 22% said they are operating permanently on a hybrid schedule; and 6% said their team is permanently fully virtual.

As a result of recent market volatility, 34% of advisors reported that they are more often meeting with clients face to face. In addition, 37% of advisors said the recent downturn in markets has led to a large number of new client prospects.

These are the top ways advisors are growing their business in 2022:

• Referrals without asking
• Asking for referrals from clients and strategic alliances
• In-person networking
• Email marketing
• Email newsletter to prospects
• Live client appreciation events

Advisors identified market volatility, inflation and the implications of geopolitical uncertainty as the chief barriers to their success. In contrast, the top three challenges advisors cited in October were changing legislation, the presidential administration and repeated shutdowns due to the resurgence of the coronavirus.

“As we continue to emerge from the global pandemic, it’s fascinating to monitor how advisors have repositioned their practices for the long term,” Mee said. “Regardless of how your practice is positioned, a customized approach to your client needs should remain paramount.

“However, as face-to-face interaction continues to normalize, I would expect in-person networking to trend higher on the list of effective marketing strategies.”

Photo: Adobe  Stock