Some members may be among those investors that are still skittish about risk when it comes to their investment choices and if they are adequately prepared to retire.
Nearly 1,300 independent financial advisers provided that assessment in the Curian Capital LLC "2011 Advisor Survey" released in late February. They were asked to gauge how market volatility and the economic climate have impacted their perceptions in four main areas–economic outlook, product selection and investment strategies, business development, and platforms and providers.
Forty-three percent of advisers felt that not generating enough income to last through retirement is the biggest threat to their clients’ retirement plans. Thirty-seven percent said the majority of their clients are even more concerned about market volatility. More than two-thirds of advisers said their clients are requesting more conservative investments and guaranteed income features, while 44% say clients are requesting a tactical asset allocation approach. Between two and four different investment strategies were used in each client portfolio, 79% of advisers noted.
The economic outlook has certainly had an impact on how clients are treated and how advisers perceive it. Forty-two percent of the survey’s respondents believe the recession is over while more than two-thirds think inflation is a growing concern that will begin to impact portfolio construction within the next two years. The recent rise in the equity markets is not enough to impact clients’ risk tolerance, with 88% of respondents saying their clients’ risk tolerance is either lower or unchanged compared to a year ago.
How advisers do their job may have an impact on how they are able to work with their member and other investor clients. Most advisers value product expertise, investment research and marketing support from product providers but also report that they do not have time to utilize these services, and delivery is often ineffective. Seventy-four percent said the ability to view all of a client’s holdings on a single platform is very important, while 68% want a platform that supports multiple products and options.
Nearly half of all respondents cited time management and efficiency constraints as the biggest challenges they face. To address these challenges, 47% plan to incorporate more technology to eliminate paperwork, while 33% said they will outsource certain functions to a third party.
Eighty-one percent of respondents said they will focus on acquiring more affluent clients in 2011, while 59% plan to market their business more aggressively.
"The findings from our latest survey bring to light two key themes–clients are still apprehensive about investment risk and their retirement preparedness, and advisers continue to struggle with managing their time and resources effectively," said Chris Rosato, senior vice president of strategic development for Curian.
Despite the rebound in the equity markets during the past 12 months, the vast majority of advisers say their clients’ risk tolerance is the same or even lower than it was at the height of the crisis in 2009, according to the survey. Clients are requesting products with guaranteed income features to help address the possibility that they will not be able to generate enough income in retirement. Advisers are also seeing a demand for alternative investments and portfolio strategies such as tactical asset allocation.
In light of these trends, product providers will need to offer a broad range of options that can help advisers address concerns about volatility and longevity, the survey noted. The functionality of wealth management platforms will also be key.
"Providers will need to focus on ensuring that their support programs are practical, relevant and easily accessible," said Mark Schoenbeck, senior vice president and chief marketing officer for Curian. The survey reveals that advisers value tools and resources that help support their businesses, but in many cases they aren’t able to take advantage of them, he added.