While firms such as Charles Schwab are concerned that the 2024 elections will be a “crazy time” for investors, a new survey of CFP professionals finds advisors expect their clients to invest and add to regular and retirement accounts despite election year jitters.
But that doesn’t mean that the upcoming U.S. elections aren’t weighing heavily on investors' minds, according to a new survey by the CFP Board of Standards.
Some 83% of CFPs’ clients expect the 2024 election cycle to have at least some impact on their financial decisions, while half of advisors report their clients are placing significant importance on the elections. Another third report that their clients are “somewhat” concerned. Only 17% of CFP professionals said their clients do not think the election will have much of an impact on their financial plans, the survey found.
While there has been significant growth in the U.S. economy in the past year, investors still have uncertainty. “The U.S. economy expanded by 2.5% and created 3 million jobs in 2023. At the same time, Americans are navigating above-average inflation and interest rates, leaving consumer sentiment measures below their historical averages. Adding to this dynamic is the upcoming 2024 election and its potential outcome,” the board said.
But election year concerns and even anxiety haven’t translated to pessimism, advisors said. In fact, six out of seven CFP professionals said their clients have a positive outlook for 2024 despite ongoing economic and political uncertainty. And nearly half (48%) found their clients are more optimistic this year than in 2023, the survey of 675 CFPs found.
“The value of working with a competent, ethical financial advisor is even higher during times of economic uncertainty,” CFP Board CEO Kevin R. Keller said. “No matter what’s ahead, Americans who work with a CFP professional can face the future knowing that the financial advice they receive is in their best interest.”
In fact, optimism appears to be making Americans bullish on investing this year, according to the CFP Board. Nearly 3 in 5 CFPs say their clients are more likely to start to invest or increase their level of investment because of their financial outlook. “This contrasts with a mere 8% of survey respondents indicating that their clients are likely to reduce the size of their investments,” according to the survey.
In meetings, investors want to discuss preparing for retirement (77%), dealing with inflation and rising prices (60%) and understanding the national economy (56%), CFPs said.
Meanwhile, advisors are recommending a range of strategies including adding to retirement or investment accounts (75%) developing or revising a financial plan (62%), prioritizing retirement savings (60%) and investing in the stock market (32%), the survey found.
In response to the surge in interest rates, 50% of advisors are recommending that investors reduce debt, 41% are advising clients “to move funds into investments that pay higher interest rates, such as high-yield money market funds and certificates of deposit, this year, while 28% are counseling clients to reduce their exposure to high-interest debt,” the board reported.
It’s worth nothing that higher rates and fewer home listings are having a dramatic impact on investors’ plans for home purchases in 2024. CFPs reported their clients “are far less likely to purchase a home this year.” Some 44% of advisors said their clients have taken home buying off their front burner because of limited supply and high interest rates.
Instead, Americans are more interested in investing in their current homes, CFPs said. In fact, clients are more likely to make a home repair or renovation because of their 2024 financial outlook, 45% of CFPs said.
Clients’ positive sentiment also makes them more likely to take a vacation(43%), retire (35%) and get medical care (21%), CFPs reported.
“However, many are delaying major life events or purchases. Of the CFPs surveyed, 44% say their clients are less likely to purchase a home, 20% said their clients are less likely to start a family and 12% said their clients are less likely to get married,” the survey found.
“CFP professionals are a port in the storm for anxious investors,” said Kevin Roth, Ph.D., managing director of research at the CFP Board. “Whether a client is contemplating a major life change or a relaxing vacation, the trusted advice of a CFP professional is more important than ever,” said Kevin Roth, Ph. D. managing director of research at the CFP board.
While 2023 was a year of expansion for CFPs, with 85% reporting that they added new clients last year, “2024 is looking more promising,” the CFP board said.
Seven in 10 CFPs expect their client base to expand, with 9% expecting it to expand dramatically. A quarter of advisors anticipate their client base to hold steady, while only 5% believe their client base will contract, according to the survey.