Clients’ investment decisions are being motivated by fear, rather than greed, according to a majority of advisors in a new Eaton Vance survey.
Seventy-six percent of the more than 1,000 advisors surveyed in the Advisor Top-of-Mind Index for the fourth quarter, which was released Thursday, say their clients are motivated by fear of market outcomes rather than by an effort to chase returns.
“This creates an opportunity for advisors to add tremendous value to their services,” says John Moninger, managing director of retail sales at Eaton Vance. The Advisor Top-of-Mind Index is a quarterly assessment of advisor sentiment.
“There is a disconnect for investors because the market has been doing relatively well,” says Moninger.
A number of factors create this fearful environment, according to Eaton Vance, including uncertainty about the outcome of the upcoming election, questions about potential interest rate hikes and the slow recovery from the recent recession.
More than half (57 percent) of advisors feel the effect of the upcoming election will be negative, no matter what the outcome, but almost all advisors are discussing the election with their clients.
“To a certain extent, things are on hold until after the election,” Moninger says. “But other factors are also on advisors’ minds.”
Advisors predict the Federal Reserve’s decision about interest rates will be the biggest driver of market volatility over the next six months. Thirty-nine percent of advisors anticipate interest rates will go up before year-end, while another 41 percent expect the Fed to act early in 2017.
“Macro events have taken center stage in advisors’ minds this quarter and caused a lot of uncertainty,” Moninger says. “Uncertainty is unsettling, but advisors can help clients navigate through periods of market volatility by discussing long-term goals and reviewing the tactical plans in place to help meet or exceed those goals.”
The top three issues advisors would like to see addressed by the new president and Congress are tax simplification (56 percent), investing heavily in national infrastructure (38 percent), and deficit reduction or entitlement reform (36 percent), the survey shows.