Data & Research August 20, 2015

Most RIAs Still Bullish on the Markets

Nonetheless, they are diversifying clients’ portfolios.
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Fifty-nine percent of registered investment advisers (RIAs) do not see the U.S. equity bull market coming to an end anytime soon, Aberdeen Asset Management found in a survey.

Forty-nine expect the bull market could continue for another three years. Nonetheless, they are diversifying clients’ assets into international and emerging markets equities, U.S. fixed income and alternatives to hedge against a market downturn.

However, RIAs appear conflicted about their equities outlook, with 38% allocating more to international and emerging market equities, and 27% cutting back on equities and putting the money into U.S. fixed income and alternatives.

“Risk is a constant that needs to be at the forefront of investment decisions,” says Mickey Janvier, head of business development-wealth management at Aberdeen. “These results highlight the fact that advisers are increasingly complementing their U.S. equity exposures by adding to relatively uncorrelated asset classes.”

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Janvier said investors need to take a cautious approach: “We believe business fundamental will continue to support the U.S. equity market for the long-term investor. With the macroeconomic environment remaining constrained, due to events like the Fed tightening its policy, the Greek debt crisis and negative impact of a strong U.S. dollar, in our view, it’s important for investors to take a bottom-up approach to help navigate this environment as markets become more discriminate and sector and stock dispersion increase.”

Asked what factors they consider when weighting investment options, the most common is market risk and macro-economic trends (cited by 47%), followed by default risk and the quality of underlying investments (17%), inflation or purchasing power risk (14%), mortality risk (12%) and liquidity risk (10%). Seventy-five percent said it is important to factor in clients’ risk tolerance when building their portfolios.

Data & Research August 20, 2015

Plan Participants Prefer One-on-One Advice to Group Sessions

They also want personal guidance during enrollment.
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Eighty-eight percent of participants want one-on-one training on their retirement plan, PlanVision found in a survey. PlanVision said this could be due to participants not wanting to appear uninformed in front of colleagues. Only 21% would like the training in a small group, 18% via webinar, and 8% in a classroom.

Nearly all respondents, 96%, want personal guidance during enrollment. Ten percent have no understanding of investments at all, 34% have a limited understanding of investments and 34% said they understand investments reasonably well but would like assistance.

Nearly six out of 10, 58%, don’t know if they’re on track for retirement. Among this group, 70% would like a personalized retirement plan. Only 18% said they feel that they are on track. Among this group, 48% had worked with an adviser. Nearly one quarter, 23%, said retirement was too far away for them to have a good sense of whether they are on track or not.

Asked about risk tolerance, 80% said they ranged from moderate to aggressive. Only 18% said they were conservative or moderately conservative investors. “Most investors are willing to include volatile investments in their portfolio,” PlanVision said. “They understand the long-term nature of the investment and the trade-off of losing money in the short run to have more in their retirement account.” In fact, experts advise investors, even those approaching retirement because of the many years they will face in retirement, to ignore volatility.

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After being given an explanation of fees, 95% said they understood them, with the majority (96%) saying they understood how fees impact their long-term returns. “This is a good sign, and a great start toward helping employees understand their retirement benefits,” PlanVision said. “This should also have a spillover effect and help people become better consumers of investment products on their own.”

PlanVision concluded: “The notion of retirement readiness is emerging in the defined contribution industry. Employer-based retirement plans are expected to play a key role in helping people of all types pursue more flexibility in their retirement years.” PlanVision’s full report can be downloaded here.

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