High-net-worth investors are very focused on retirement—78% say ensuring a secure retirement is their top investment priority. Yet, surprisingly, they are much less concerned than advisors about reaching their retirement goals and outliving their assets. Only 7% of investors strongly agree they are very concerned about their ability to meet retirement goals, while 32% of advisors think their clients are very concerned about retirement goals. Similarly, only 8% of investors strongly agree they are concerned about outliving their assets while 27% of advisors think their clients are very concerned.
Why the disconnect? It may reflect, at least in part, clients’ faith in their advisors’ ability to safely guide them to a secure retirement. But our survey indicates that advisors have a higher level of caution regarding longer-term factors such as longevity risk and inflation risk. Investors are more focused on shorter-term concerns, such as low returns. Advisors have an opportunity to educate clients about the very real risks associated with longevity and inflation.
While investors are underestimating the effect of longevity and inflation risk, they do understand that lower-yielding bonds are not going to provide adequate retirement income. In fact, investors view income products as an important part of retirement security, even more so than advisors. A total of 65% of investors cite a positive effect on retirement as the most important aspect of income products as compared with 53% of advisors. Given the survey data, it is clear that dividends can play an important role in the portfolios of the approximately 76 million baby boomers near or just entering retirement. The parents of baby boomers already understand the appeal of dividends—current retirees receive about half of all dividend income earned.
More information about the survey can be found at www.federatedinvestors.com/2013investormindset
About the Survey
The 2013 Investor Mindset Survey was fielded online nationally between June 20 and July 5, 2013. Interviews were conducted with 1,013 high-net-worth investors, who were U.S. adults, age 18 and older, with at least $500,000 in investable assets, excluding their primary residence and employer-based retirement funds. The 301 financial advisors interviewed were primarily certified financial planners, chartered financial analysts, registered investment advisors and personal financial planners.
KRC Research, an independent third-party research firm, designed and conducted the survey on behalf of Federated Investors.
Bio
Linda A. Duessel is senior equity strategist and senior portfolio manager at Federated Investors. As senior equity strategist, she works as part of the team responsible for formulating Federated's views about various equity market conditions and the firm's positioning strategies within the equity strategic value team. As senior client portfolio manager, she articulates the strategy, process, positioning and performance of each of Federated's strategic value portfolios.