The Advisor Investment Pulse

What's Bugging Advisors?

Volatility, political & regulatory changes surge as top concerns;
A renewed focus on diversification, planning for the long-term

May 10, 2016 — BOSTON–(BUSINESS WIRE)–Financial advisors were most concerned about market volatility in Q1 2016, according to the latest Fidelity® Advisor Investment Pulse study.

Nearly 30 percent of advisors cited it as an area of focus, a significant rise from less than 20 percent in the previous quarter.

Survey results also reflected advisors’ increasing attention on the election season and the Department of Labor’s (DOL) investment advice rule1, as developments in the political and regulatory landscape emerged as an important consideration, taking the No. 3 spot in Q1.

The latest results of the quarterly survey were released today by Fidelity Institutional Asset Management, a distribution and client service organization dedicated to meeting the investment needs of financial advisors, institutions and consultants.

Portfolio management also featured as a top-of-mind-theme for advisors, taking the No. 2 spot. On the other hand, concerns about interest rates fell significantly, tumbling from No. 2 in Q4 2015 to the No. 7 spot in Q1 2016.

While approximately one out of every five advisors surveyed in the previous quarter cited interest rates as a concern, the number dropped to fewer than one in ten in the first quarter of this year. Interest rates had consistently been one of the top five topics for advisors every quarter for more than two years.

Don’t Confuse Volatility with Risk

“There is no question that the market had a volatile start to 2016, so it’s no surprise that volatility was a top concern for advisors in the first quarter, particularly in January,” said Scott E. Couto, president, Fidelity Institutional Asset Management. “Volatility can be uncomfortable, but advisors shouldn’t allow short-term events to dictate changes to long-term strategy.”

“It is important for advisors to focus on what they can control,” added Couto. “This starts by helping clients look at longer-term horizons, and by having a plan to invest through market fluctuations.”

Advisors play a crucial role by encouraging clients to avoid locking in losses by bailing out at the first sign of volatility, particularly as markets have proven themselves to be resilient over time. In the wake of the most recent recession, from March 2009, the U.S. stock market generated a five-year return of 178 percent. Similarly, after a dramatic period of Fed tightening, the market generated a five-year return of 251 percent from December 1994.2

One of the key ingredients to encouraging clients to stay invested through volatility is having a diversified3 portfolio across stocks, fixed-income and short-term products. Advisors may consider investment-grade bonds to help provide downside protection, as these have historically demonstrated a negative correlation to stocks.

advisors shouldn’t allow short-term events to dictate changes to long-term strategy

Even in a rising interest rate environment of more than 40 years between 1941 and 1981, bonds provided an average return of 3.4 percent.4 A multi-sector bond strategy may provide higher risk-adjusted returns than any other individual bond sector while exhibiting much lower volatility than high-yield.

Turning Focus on DOL Rule into Competitive Advantage

Anticipation of the final DOL rule on investment advice, issued in April, played a significant part in driving the increased focus among advisors on political and regulatory developments.

Advisors who develop an effective plan, aligned with their firm’s response to the rule, may be able to create a competitive advantage for themselves. They may evaluate their business by determining account transition plans, establishing a framework to discuss the impact of the rule with clients, and discussing asset consolidation. This may also be an opportunity for advisors to reaffirm their value to clients and identify options to potentially scale portfolio management.

Resources for Advisors

Fidelity Institutional Asset Management offers advisors original insights aimed at addressing their top concerns. The resources aim to support client discussions and cover topics such as managing through current market dynamics, capturing opportunities created by the Department of Labor’s investment advice rule, and the value of active management. To access these insights from Fidelity, visit: (for financial advisors only). Resources include:

  • Market Volatility: Fundamentals for Investors
    While market volatility can be unsettling, it is not unusual. Two basic principles can help advisors navigate through volatility.
  • Myth: Always Avoid Bonds When Rates Rise
    When rates rise, bond prices fall – that’s the traditional view regarding fixed-income. With government yields near historic lows, many investors are concerned about the interest rate risk in their portfolio.
  • Understanding the DOL Investment Advice Rule
    Advisors can leverage Fidelity’s insights to position their business to capture opportunities created by the DOL Investment Advice Rule.

The Fidelity Advisor Investment Pulse is a survey that captures the investment topics on the minds of around 250 advisors in order to identify common concerns and deliver resources to help them navigate changing market conditions. Fidelity has been tracking advisor sentiment about investing concerns and opportunities since April 2012. This proprietary research enables Fidelity to provide advisors with timely perspectives from their peers, and offer tools to take advantage of the investment opportunities that exist today.

About the Fidelity Advisor Investment Pulse

The Advisor Investment Pulse is an ongoing primary research effort that captures the views of more than 1,000 Fidelity Institutional Asset Management advisor clients annually. All Fidelity Institutional Asset Management advisor clients in the broker-dealer and registered investment advisor communities are asked to participate in the online survey. These advisors serve a range of clients, including individual investors, businesses, plan sponsors and institutions. Respondents are asked an open-ended question: “Thinking about the investing environment and outlook, and the potential impact on your client portfolios, what investment challenge or opportunity would you say is top-of-mind for you right now?”

The survey reports top-of-mind themes of most concern to financial advisors in both their practices and in the financial markets. These themes are distilled from individual financial advisor comments. The chart reflects the most current five themes that represent the most widely held views. Given the variability of the number of responses over time, and the ongoing nature of this effort, confidence levels will also be variable.

About Fidelity Investments

Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.2 trillion, including managed assets of $2.0 trillion as of March 31, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit



Not NCUA or NCUSIF insured. May lose value. No credit union guarantee.
Diversification does not ensure a profit or guarantee against a loss. Investing involves risk, including risk of loss. Past performance is no guarantee of future returns.
In general the bond market is volatile, and fixed-income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed-income securities also carry inflation, credit, and default risks for both issuers and counterparties. Lower-quality fixed-income securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic and political risks.
Because of their narrow focus, sector securities tend to be more volatile than funds that diversify across many sectors and companies. Each sector fund is also subject to the additional risks associated with its particular industry.
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1 The Department of Labor “Conflict of Interest Rule – Retirement Investment Advice” significantly expands the categories and types of activities that would constitute fiduciary level investment advice under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, and the Internal Revenue Code (“Code”). This expanded definition of investment advice would extend the fiduciary duties under ERISA and the Code to financial advisors who provide investment advice on all types of IRAs and employee benefit plans. Not FDIC insured. May lose value. No bank guarantee.
2 U.S. stock market returns represented by total return of S&P 500® Index. Past performance is no guarantee of future results. It is not possible to invest directly in an index. First three dates were determined by best five-year market return subsequent to the month shown. Sources: Ibbotson, FactSet, FMR Co., Asset Allocation Research Team as of December 31, 2013.
3 Diversification does not ensure a profit or guarantee against a loss.
4 Fidelity Investments proprietary analysis of historical asset class performance, using data from indices from Barclays, Fidelity Investments, Morningstar.