Advisors managing client emotions in addition to their money
January 14, 2014 –RADNOR, Pa.–(BUSINESS WIRE)–Financial advisors see anxiety adversely impacting clients’ financial planning and investment decisions, according to survey results released today by Hartford Funds. From missing investment opportunities to prioritizing low risk over the potential for higher returns, Americans’ uncertainty and anxiety are driving their financial decisions. Roughly 130 advisors were surveyed regarding client investment behaviors against the backdrop of today’s economic environment.
“While it’s no surprise that consumers are anxious about the economy, advisors are facing the challenge of not only managing clients’ investments, but also managing the emotions and fears that influence their decisions,” said John Diehl, Senior Vice President at Hartford Funds. “While there are a number of factors to consider, the survey findings underscore the need for both advisors and clients to recognize and evolve certain behaviors in order to effectively pursue their financial goals.”
Key findings from the survey include:
- Anxiety is adversely impacting client investment decisions:
Most advisors (57 percent) believe clients have allowed their anxiety to adversely impact their investment decisions. This behavior is one of the top two concerns shared by advisors today. Market volatility was the most-cited issue that is keeping advisors up at night, followed closely by client anxiety about saving and investing. - Consumers place higher value on investment certainty than returns:
More than three-quarters (76 percent) of advisors noted that their clients are prioritizing investment certainty over the potential for higher returns. Despite this sentiment, 37 percent of advisors expect their clients’ risk tolerance to increase over the next 12 months, while only 17 percent expect clients to become more risk averse. Nearly half (46 percent) of advisors surveyed expect risk tolerance to remain the same.
Interestingly, this trend of shifting risk aversion follows advisors’ own patterns. Thirty-seven percent of advisors reported their personal investment profile has become less conservative over the past 12 months. Only ten percent have become more conservative, with the remaining 53 percent keeping a steadfast risk profile. - Advisors are seeking alternatives to fixed income amid rising interest rates:
Two-thirds (66 percent) of advisors surveyed indicated that the potential of rising interest rates has led them away from recommending fixed-income vehicles to their clients. The remaining 34 percent of advisors, who indicated they were not moving their clients out of fixed income, saw various benefits to sticking with their fixed-income strategy. Forty-one percent of those respondents attribute their decision to still seeing opportunities in the bond market. Thirty-two percent believe that no other vehicles provide the same income and security; and 23 percent remain confident in the long-term performance potential of fixed-income products. Only four percent indicated a lack of client confidence in the equity market as their motivation for their commitment to fixed income. - Equity Value Funds and corporate bond products provide greater clarity for clients:
When asked about client anxiety as it relates to various investment vehicles, advisors overwhelmingly cited emerging market funds as anxiety-inducers. Ninety percent of advisors polled indicated that these products caused the greatest anxiety among clients. Sixty-five percent of advisors said international bond funds are also a cause for client anxiety.
On the other hand, seventy-three percent of respondents indicated that clients were least apprehensive about equity value fund products and 68 percent cited corporate bond fund products as the least concerning.
“Anxiety creates a tendency among clients to focus on negative information and, in some cases, seek it out to support their fears and concerns,” said Vernon Meyer, Chief Investment Officer at Hartford Funds. “We arm advisors with the tools they need to educate clients about market realities and the changing economic environment to temper overall investing anxiety. Illustrating how past cycles or events have generally resulted positively can help encourage long-term thinking and make the case for a diversified and balanced portfolio.”
The survey of 128 financial advisors was fielded in-person between September 18, 2013 and November 5, 2013. It was executed by Hartford Funds.
About Hartford Funds
Founded in 1996, Hartford Funds is a leading provider of mutual funds and 529 college savings plans. The Company offers a broad range of actively managed strategies designed to provide solutions for a variety of investment needs. Hartford Funds has total assets under management of $66.8 billion as of September 30, 2013 (excluding assets used in certain annuity products). Hartford Funds are sub-advised by Wellington Management, a leading investment advisor. For more information about the fund family, visit www.hartfordfunds.com.
