Platform providers must reinforce the value of long-term strategic portfolio management in times of economic downturnA new report from Cerulli Associates examines retail investors’ preferences with regard to direct investing platforms and the products they wish to use on them. Access the full report here.
June 6, 2023, BOSTON—Investors adopted a decidedly negative economic worldview in 2022. However, affluent investors indicate that they believe financial services firms put clients’ best interests first. Providers must use this trust to reinforce positive investor behaviors, according to The Cerulli Report—U.S. Retail Investor Products and Platforms 2023: Partnering Through Adversity.
With the exception of January, a majority of investors were pessimistic throughout 2022 as recession fears lingered and equity markets fell. Investors were most pessimistic in July and October (65%), although optimism gradually rose from 30% to 41% in 4Q 2022.
Over the course of 2022, 44% of affluent respondents reported that they had actively reconsidered their overall portfolio plans in the previous three months, with clients of private banks (61%) and full-service brokerages (52%) doing so most commonly. In contrast, just 25% of respondents reported having taken no action with their finances during this period.
“Evolving circumstances and increasing apprehension can drive clients toward making portfolio changes that ultimately hinder progress toward their financial goals,” says Scott Smith, director. “To counter these tendencies, providers should encourage their advisors to consistently position market volatility as an exploitable expectation rather than a conquerable enemy.”
Confidence Among Affluent Investors
According to the research, despite market apprehension, affluent investors continue to remain confident that providers are looking out for them—61% indicate that they believe financial services firms put their best interests first. This notion is most commonly held by clients working with bank advisors (75%), private banks (73%), and independent advisors (72%).
“This feeling of alignment is particularly useful during periods of market turbulence and declines as these clients are less likely to feel losses are tied to advisor malfeasance,” says Smith. “No matter how confident and informed a client may be, these circumstances require escalating levels of communication and reassurance,” concludes Smith.
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Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.