Fifth Annual Advisor Authority Study Offers 360-Degree View on Top Factors Causing Financial Concerns, Impacting Portfolios and Driving Volatility
Louisville, KY—June 17, 2019—Two-thirds of investors (66%) and more than half of Registered Investment Advisors (RIAs) and fee-based advisors (56%) anticipate market volatility will increase over the next 12 months. As uncertainty is on the rise, investors and advisors are recalibrating their financial outlook. For the first time in four years, investor and advisor optimism both declined at the start of 2019. Investor optimism fell seven percentage points, to 55% in 2019 from 62% in 2018, and advisor optimism dropped eleven percentage points, to 55% in 2019 from 66% in 2018.
These are among the findings in a new Special Report, “Safe Havens in an Uncertain World,” from the fifth annual Advisor Authority Study of more than 1,600 RIAs, fee-based advisors and individual investors, commissioned by Nationwide Advisory Solutions and conducted online by The Harris Poll. This 360-degree view on the top factors causing financial concerns, impacting portfolios and driving volatility—and the top proactive strategies to meet clients’ complex needs—can help RIAs and fee-based advisors compete more effectively in times of rising uncertainty.
“More than a decade after the Financial Crisis of 2008, concern about volatility is again top of mind for advisors and investors alike, and uncertainty is on the rise,” said Craig Hawley, Head of Nationwide Advisory Solutions. “Our latest Advisor Authority Special Report uncovers the key factors that RIAs and fee-based advisors need to understand investors’ top concerns, confront the complex dynamics of a challenging market and create the ‘safe haven’ investors seek—unlocking greater loyalty and attracting new clients to drive greater growth.”
The opportunity is substantial. In the face of rising uncertainty, the number of investors who say they have an advisor is on the upswing, increasing eleven percentage points in four years, to 62% in 2019 from 51% in 2016.
Understanding Investor and Advisor Outlook and Concerns
Optimism was high leading into 2018, fueled by the prospects of a finance-friendly tax plan, the administration’s promise to cut regulation and a business-friendly majority in both the House and the Senate. But investor and advisor optimism both declined leading into 2019 as uncertainty has prevailed—aggravated by uncertainty around interest rates, the less promising reality of tax-reform, the growing partisan divide and an escalating trade war with China.
Now investors, RIAs and fee-based advisors are cautious, yet clear-eyed. Nearly six in 10 investors (58%) and more than half of RIAs and fee-based advisors (54%) are concerned about a U.S. economic recession over the next 12 months. Over half of investors (54%) and RIAs and fee-based advisors (56%) are concerned about a U.S. bear market over the next 12 months. Likewise, two-thirds of investors (66%) and more than half of advisors (56%) expect market volatility to increase over the next 12 months.
At the same time, they are focused on practical matters impacting their wallets and their portfolios. Investors say cost of healthcare (33%) is their number-one financial concern, followed by taxes (31%), protecting assets (27%), saving enough for retirement (23%) and inflation (16%). RIAs and fee-based advisors also most commonly cite cost of healthcare (27%) as their clients’ number-one financial concern, followed closely by taxes, protecting assets and saving enough for retirement in a three-way tie for second place (all at 26%). Rising interest rates are a close third at 24%—and as other findings from this survey show, interest rates are a recurring concern for RIAs and fee-based advisors.
Causes of Volatility: Gridlock in Washington & Global Instability
Without a doubt, some investors are losing sleep over market volatility. More than one-fourth of investors (28%) say that market volatility keeps them up at night when they think of protecting their assets and saving enough for retirement (30%).
Headlines about lawmakers at home and abroad are top of mind—and impacting the markets—according to investors. Gridlock in Washington is the number-one factor most likely to cause volatility, selected by nearly half (45%) of investors. Global instability is second, selected by 38% of investors, and U.S. economic performance is a close third, selected by 32%.
RIAs and fee-based advisors have a somewhat different viewpoint. According to advisors, interest rates are the number-one factor most likely to cause market volatility, selected by one-third (33%). This is followed closely by gridlock in Washington and U.S. economic performance, tied for second at 30% and global instability is a close third at 29%.
Managing Volatility: Strategies & Solutions
As noted, the number of investors who say they have an advisor is growing year over year. Asked to identify what would increase the likelihood that they would work with an advisor over the next 12 months, over half of investors (54%) say market volatility is the number-one scenario. Asked to identify the most important benefit of working with an advisor when markets are volatile, investors with an advisor say that helping them stay focused on long-term goals (21%) is number-one. This is followed closely by helping them make more informed decisions (20%) and protecting their assets against market risk (20%).
With volatility on the rise, the vast majority of RIAs and fee-based advisors (88%) have a strategy to protect their clients’ assets against market risk. While only 65% of investors in 2019 say they have a strategy to protect their own assets, this is up eight percentages points from just 57% of investors in 2018.
To protect assets against market risk, nearly two-thirds of advisors (62%) and investors (63%) agree that diversification is their most utilized solution. However, RIAs and fee-based advisors are more focused than investors on a diverse range of solutions—including fixed annuities (53% vs. 30%), fixed index annuities (48% vs. 23%) and liquid alternatives (44% vs. 26%).
To learn more about the factors driving key concerns and top proactive strategies, financial professionals can download the Advisor Authority 2019 Special Report, “Safe Havens in an Uncertain World” at: https://know.nationwideadvisory.com/AdvisorAuthority2019Ch1
For additional insights, financial professionals can also download the latest Advisor Authority 2019 infographic at: https://know.nationwideadvisory.com/AdvisorAuthority2019Ch1Infographic
The fifth annual Advisor Authority study explores the investing and advising issues confronting RIAs, fee-based advisors and investors—and the innovative techniques that they need to succeed in today’s complex market. It features a special focus on the most successful advisors and the most affluent investors. These latest findings from the fifth annual study are part of an ongoing series of Special Reports that will be released through the first quarter of 2020.
About Advisor Authority: Methodology
The fifth annual Advisor Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from February 15 – March 4, 2019 among 1,021 financial advisors and 824 investors, ages 18+. Among the 1,021 financial advisors, there were 507 Registered Investment Advisors and 514 Broker/Dealers. Among these respondents, a “trended group” of 766 RIAs and fee-based advisors, who meet the same qualification criteria as in prior years of our Advisor Authority research, continue to be the primary focus in this year’s series of Special Reports. Included in this group of financial advisors is a new segment of 255 Wirehouse Broker/Dealers that is excluded from trended data to allow for year-over-year comparisons. Among the 824 investors, there were 205 Mass Affluent (Household Investable Assets of $100,000 to less than $500,000), 205 Emerging High Net Worth ($500,000 to less than $1 Million), 207 High Net Worth ($1 Million to less than $5 Million) and 207 Ultra High Net Worth ($5 Million or more). Results of this new research are compared to results from similar 2016, 2017 and 2018 studies conducted online by The Harris Poll on behalf of Nationwide Advisory Solutions. Detailed methodologies from these studies are available upon request.
Advisors are weighted where necessary by employment status and active management to bring them in line with previous years’ profile. Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population.
About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.
About Nationwide Advisory Solutions
Nationwide Advisory Solutions is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. Nationwide Advisory Solutions does this by developing and delivering value-added investment products, services and technologies that fit the fiduciary standard—wrapped in an industry-leading customer experience. To learn more, please visit www.nationwideadvisory.com
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