Apparently, advisors are talking but clients are not listening, according to a study on a potential end to the bull market conducted by Hartford Funds.
An overwhelming majority, 89 percent, of advisors say they have discussed preparing for a potential bear market with their clients, but the clients tell a different story. Only 43 percent of Americans who are working with an advisor say they have discussed a possible downturn in the market with their advisors. The survey, released Tuesday, included 1,005 individuals and 121 advisors.
Among those survey participants who have never worked with an advisor, 91 percent said they have not discussed a bear market with anyone in their circle of family and friends.
Many investors feel they are better able now than they were prior to the Great Recession to deal with a bear market. Of those who were invested in the market in 2007, 36 percent said they are better prepared today. Nineteen percent said they are somewhat better prepared and 17 percent said they are much better prepared.
“Proactivity is the key to effective advice as clients look to advisors to see around corners and anticipate potential changes that may affect their portfolios,” said John Diehl, senior vice president for strategic markets at Hartford Funds. “Preparation is vital in protecting client assets, and it is critical that advisors continue actively engaging their clients to provide dynamic and thoughtful counsel to help them navigate a potential market downturn.”
Education is also needed, Hartford Funds said. Seventy percent of those individuals surveyed could not identify a bear market as being related to a declining stock market. While those who work with financial advisors are better informed, more than half (56 percent) still did not understand the connection.
Investors are slightly more pessimistic about a potential downturn than are advisors. Sixty-eight percent of investors said they anticipate that a bear market will occur within the next year, while 77 percent of advisors do not expect a downturn until at least the second half of the year and 31 percent of those said it will be 2020 before a bear market occurs.
“The limited education of the general population on the investing landscape presents an important opportunity for advisors,” Diehl said. “Educating clients is a crucial component of effective human-centric advice and helps ensure clients are prepared for any changes in the market, while also increasing the advisor’s potential to bring on new clients through word-of-mouth referrals -- the most powerful business development tool available to advisors.”