Most advisors have little hope of positive performance by the market this year, with half believing equities will drop 10% or 20%, according to a survey released by InspereX.
InspereX surveyed 799 advisors from RIAs, independent broker-dealers, wirehouses and banks for its 2022 Advisor Pulse report and found that a majority expect either a market loss or gain of 10%. Specifically, 39% of advisors expect the year to end with a 10% loss, 37% expect it to close even, and 12% expect it to gain 10%. Another 11% expect a loss of 20% or more and only 1% expect a gain of 20%. When the survey was taken in June, the S&P 500 was down about 18% on the year.
Seventy percent of advisors said the average performance of their non-retired clients was down between 1% and 14%; another 21% said clients are down between 15% and 24%; just 3% said they were even on the year, and only 5% said they were up on the year, the survey said. Despite market performance, 85% of advisors said their clients are only down gains, not principal.
The economic turmoil has not harmed advisors’ relationship with their clients, according to the survey. Only, 11% said the market downturn has caused friction between them and their clients. “Advisors and clients are on the same page in terms of what they are worried about, citing inflation, market volatility and rising interest rates as their top concerns,” the survey noted.
All of the advisors said they are looking at alternative investments for their clients.
“If the market was performing well, that would be astounding, but since it is not, it is to be expected that advisors would be looking elsewhere for their clients,” Chris Mee, InspereX's managing director and head of market-linked products distribution. InspereX is a fixed income and market-linked product distribution and trading firm based in Delray Beach, Fla.
Notably, Mee said a large number of advisors, 30%, said their clients are talking about delaying retirement due to recent market weakness. However, 69% of advisors said their clients are more comfortable with volatility than they were in the past.
Also, 36% of advisors said they are introducing clients to individual bonds for protection of principal and predictable income; 29% said they are using individual municipal bonds; and 28% said they were avoiding bond ETFs and funds where there is no guaranteed return on principal.
Advisors seem to be coming out of pandemic-mode. Almost half said in-person meetings are now the main way they are meeting with clients, while 33% said they are predominately meeting by phone, and 21% are meeting virtually. Two-thirds also said the majority of their teams have returned to the office full time.
Market volatility, inflation and geopolitical events were named as the top key challenges this year In contrast, the top three barriers cited in October 2021 were changing legislation, the presidential administration, and repeated shutdowns due to the resurgence of Covid.