Survey Says Advisers Helped Minimize Investment Loss

Fidelity Investments research shows that the largest percentage of individual investors surveyed (32%) feel that their adviser or broker helped minimize investment loss during the past six months.

However, one in four (24%) investors believe that their adviser did not minimize losses—even though they reported their investable assets performed, on average, 16 percentage points better than the S&P 500 during the past six months, Fidelity said.

When asked a similar question about how their clients behaved in this challenging market environment, advisers reported that their clients did well, and did not panic, with many understanding that investment losses were to be expected, according to a release of the survey results from Fidelity.

“The fact that investors differ in their opinions about how their adviser performed shows just how challenging this market has become for advisers,” said Charles Goldman, president of Institutional Platforms, Fidelity Investments, in the release. “While this is undoubtedly one of the most challenging market environments this generation of advisers has ever experienced, it’s encouraging to see that they are optimistic about their future growth prospects. The environment also has reinforced that this is a relationship business built on communication and trust between advisers and their clients.”

Opportunity for Growth

Although many advisers across all types of channels have seen assets under management and profit margins drop over the past six months, nearly all (96%) feel that the ongoing market environment has better positioned their business for future growth, Fidelity reported.

Nearly half (49%) of advisers said that they are seeing growth come through current clients consolidating assets with them, according to the survey.

Advisers said the top three drivers of their growth are: “clients are seeking more advice,” “clients have more realistic expectations for investment returns,” and “weaker competitors are being driven from the market.”

“Times of economic and market uncertainty bring opportunity for those willing to look for it; this is especially true for advisers,” said Goldman. “The need for professional investment advice has never been greater. Advisers of all types have a once-in-a-lifetime opportunity to position their businesses for future growth by focusing on areas such as investment processes, client communication, or even talent acquisition.”

Relationships Still Strong

When asked whether the financial crisis has affected their relationship, most investors and advisers agree that the relationship has not changed, Fidelity said. Yet more advisers (38%) are likely to believe that their relationships have improved than are investors (9%).

Investors and advisers agree that more communication is needed. Almost three-quarters (72%) of advisers say they are communicating with clients more frequently, while more than one-quarter (28%) of investors plan to communicate more frequently.

Looking to the future, investors will focus more on risk. Nearly four in 10 (37%) said that they will discuss strategies to mitigate risk with their advisers, while 21% will review investments carefully to better understand potential upside and downside associated with each investment. More than half (52%) of advisers said they are reassessing their clients’ risk tolerance and 47% are discussing strategies to mitigate risk.

Fidelity surveyed more than 200 advisers and 300 investors.