Advisors were forced to rein in clients who wanted to abandon the market during recent rough times, according to Chris Mee, an executive at Incapital, a distributor and underwriter of securities and risk management investment solutions.
Most investors indicated in a survey taken in September that they trust their advisors, but many did not want to follow their advice without a little persuasion, Mee, managing director and head of wealth management solutions distribution at Incapital, said in a recent interview.
“One of the few good things to come out of the pandemic is that advisors are talking to their clients more now,” Mee said. “However, many advisors said they had to persuade clients to focus on the long term when markets fell.”
According to the Incapital Pulse Survey of 752 financial advisors, 58% of advisors said they had to convince their clients to not sell at the bottom of the market and 67% said their clients are more concerned with short-term market gyrations than having enough money in retirement. Almost all of the advisors said their clients are concerned about the upcoming election and its impact on their investments.
Investors are nervous, and 81% of the advisors said their clients have been calling more frequently since March. Ninety-seven percent said their clients have shown confidence and patience by taking the advisors’ recommendations and not changing investments.
“Financial advisors are becoming better at helping clients take a risk-managed approach to their portfolios,” Mee said. “Advisors are more important now than ever because they have been through market gyrations their entire lives” and can provide calming advice.
Because client meetings are now being held virtually, advisors can talk with more clients in a day than they did in the past, Mee said. Advisors are meeting with eight or 10 clients a day and can now meet each client more often than in the past.
Clients’ nervousness has led many to move toward more protection from market downturns in exchange for giving up a little on the upside, such as the protection provided in annuities or fixed-income options, he added. Ninety-three percent said their clients were now willing to give up a portion of market upside for downside protection. “Helping their clients stay the course with investments that meet their risk tolerance is what makes advisors so valuable, especially during periods of intense volatility and uncertainty, like today.”
“Since March, uncertainty has reigned over our lives and over the markets,” Mee added. “It’s no wonder clients have been calling their advisors more frequently for guidance. The good news is clients seem to have listened. By not selling at the bottom of the market, equity investors have been able to ride the recovery back up to near record highs, which could be the difference between achieving their goals and not.”
“What surprised me about the Pulse Survey is how optimistic advisors have remained,” he said. “Advisors feel their businesses will continue to grow in revenue and in the number of households they represent. This is the third Pulse Survey we have done and advisors have remained steadfast in their positive long-term outlooks and their ability to hold onto clients.”