Investors Better Prepared for a Downturn, Advisers Say

Sixty-one percent of registered investment advisers (RIAs) and fee-based advisers say that investors are better prepared to make it through another major market downturn, according to a Nationwide Advisory Solutions survey of more than 370 RIAs and fee-based advisers.

Seventy-four percent say that investors are more likely to work with an adviser today than they were before the Great Recession of 2008. Ninety percent say investors are more likely to listen to their guidance. Eighty-nine percent say investors are more likely to be transparent about their financial situation, and 84% say they are more likely to stick to a financial plan. Sixty percent of advisers say their clients ask if their advice is in their best interest or aligned with a fiduciary standard.

“Even a decade after the 2008 financial crisis, the most significant market downturn since the Great Depression has had a lasting impact on investors’ concerns about minimizing risk and protecting their assets, as well as their desire for guaranteed income in retirement,” says Craig Hawley, head of Nationwide Advisory Solutions.

Eighty-four percent of RIAs and fee-based advisers say investors are concerned about a future market downturn, are concerned about market volatility (79%) and are more risk averse (67%). They are also more likely to focus on product costs (56%) and ask how advisers are compensated for their advice (51%).

Seventy-nine percent of RIAs and fee-based advisers have increased their communications with clients about market conditions, and 60% have become more proactive about communicating about their compensation model. Fifty-seven percent have increased their focus on an independent, fee-based approach.

“RIAs and fee-based advisers have adapted to the needs of the post-financial crisis investor by adopting a more holistic approach, aligning the products and tools they leverage to meet investors’ concerns and proactively communicating about market risk and movement,” Hawley says.

Seventy-three percent of RIAs and fee-based advisers say they have increased their focus on holistic financial planning for clients since the crisis. Sixty-four percent say that clients are more likely to seek out guaranteed retirement income than they were before 2008 and guaranteed downside market protection (62%) to hedge against risk.

Fifty-six percent have increased their use of dividend-yielding stocks, 41% have increased their use of yield-generating exchange-traded funds (ETFs), and 37% have increased their use of variable annuities with guaranteed living benefits. The top three products they are using more since 2008 are liquid alternatives (45%) fixed index annuities (43%) and fixed annuities (31%).

Sixty-three percent are educating their clients about market cycles and holistic financial planning (57%). Twenty-eight percent are adding annuities to provide guaranteed income, and 28% are adding annuities to provide guaranteed downside protection.

Nationwide Advisory Solutions conducted the survey in August.