Re­tire­ment Ad­vi­sor Con­fi­dence In­dex

Over­all busi­ness con­di­tions for wealth man­agers ap­pear to be wors­en­ing for the first time since 2016, ac­cord­ing to the monthly sur­vey.

Financial Planning - - CONTENTS - By Harry Ter­ris

The on­set of a mul­ti­front trade war is at the top of the list of in­vestor con­cerns and is help­ing to dam­age over­all sen­ti­ment, ad­vi­sors say. For one, clients are ask­ing ques­tions about the im­pact of tar­iffs on in­vest­ment hold­ings. There are “more con­ver­sa­tions as to how [tar­iffs] might af­fect their ac­counts,” one ad­vi­sor says. Stock price volatil­ity is also weigh­ing on in­vestors, and many clients “are not as com­fort­able tak­ing on risk,” ac­cord­ing to an­other. In­deed, clients’ ap­petite for risk con­tin­ues to shrink, ac­cord­ing to the lat­est Re­tire­ment Ad­vi­sor Con­fi­dence In­dex — Fi­nan­cial Plan­ning’s monthly barom­e­ter of busi­ness con­di­tions for wealth man­agers. The com­po­nent track­ing risk tol­er­ance slid 5.4 points to 42.2, reg­is­ter­ing its fifth con­sec­u­tive month in neg­a­tive ter­ri­tory. Read­ings below 50 in­di­cate a The Re­tire­ment Ad­vi­sor Con­fi­dence In­dex, pub­lished in part­ner­ship with ADP®, is cre­ated by the ed­i­tors of Fi­nan­cial Plan­ning and is based on a monthly sur­vey of about 300 ad­vi­sors. Visit fi­nan­cial-plan­ning.com for more re­sults. ADP and the ADP logo are reg­is­tered trade­marks of ADP, Inc. ADP does not pro­vide tax, fi­nan­cial, in­vest­ment or le­gal ad­vice, or rec­om­men­da­tions for any par­tic­u­lar sit­u­a­tion or type of re­tire­ment plan.

de­cline, while read­ings above 50 in­di­cate an in­crease. The poor read­ing on risk tol­er­ance helped push the com­pos­ite into con­trac­tion ter­ri­tory, with a de­cline of 2.4 points to 49.8. That’s the first time since late 2016 that the in­dex has sug­gested over­all busi­ness con­di­tions for wealth man­agers are wors­en­ing. Be­sides risk tol­er­ance, the com­pos­ite tracks prod­uct se­lec­tion and sales, client tax li­a­bil­ity, as­set allocation, new re­tire­ment plan en­rollees and plan­ning fees. A pull­back was also seen in in­vest­ment flows. The com­po­nent track­ing the client as­sets used to buy bonds dipped into neg­a­tive ter­ri­tory slid 4.3 points to 49.5. The com­po­nent track­ing as­sets used to buy eq­ui­ties dropped 6.9 points to 52.7. “Clients are con­cerned about eq­uity and fixed-in­come valuation, and geopo­lit­i­cal risk,” one ad­vi­sor says. Some ad­vi­sors say clients are also ex­press­ing broader qualms about fun­da­men­tals, as the eco­nomic ex­pan­sion en­ters its 10th year and as the yield curve flat­tens — pos­si­bly sig­nal­ing in­creased chances for a re­ces­sion. Nev­er­the­less, ad­vi­sors say strong hir­ing has helped sup­port re­tire­ment plan en­roll­ments and con­tri­bu­tions. “New par­tic­i­pants in em­ployer plans are higher due to lower un­em­ploy­ment and busi­nesses hir­ing more work­ers,” one ad­vi­sor says. The RACI com­po­nent track­ing con­tri­bu­tions to re­tire­ment plans rose 4.6 points to 55.1, and the com­po­nent track­ing the num­ber of re­tire­ment prod­ucts sold in­creased 3.4 points to 53.4. Those moves helped keep the com­po­nent for fees for re­tire­ment ser­vices in pos­i­tive ter­ri­tory, at 52.7. The lat­est RACI, based on ad­vi­sors’ as­sess­ment of con­di­tions in June rel­a­tive to May, is ac­com­pa­nied by the quar­terly Re­tire­ment Readi­ness In­dex. The in­dex tracks eval­u­a­tions of clients’ in­come re­place­ment abil­ity, likely de­pen­dence on So­cial Se­cu­rity and ex­po­sure to big eco­nomic shifts. The num­ber of ad­vi­sors who say mass-af­flu­ent clients (net worth $250,000 to $1 mil­lion) would be ex­tremely vul­ner­a­ble to a sig­nif­i­cant de­cline in eq­uity prices was flat, at 17.8%. Ad­vi­sors say mass-af­flu­ent clients con­tinue to be ex­posed to ris­ing health care costs, with the num­ber re­port­ing that they would be ex­tremely vul­ner­a­ble to a sig­nif­i­cant in­crease edg­ing up to 35.6%. In terms of clients’ re­tire­ment prepa­ra­tions, wealth man­agers say they be­lieve that about 60% of mass-af­flu­ent clients will be able to re­place their in­come for 30 years at re­tire­ment, com­pared with 78% of high-net-worth clients ($1 mil­lion to $10 mil­lion) and 85% of ul­tra­high-net-worth clients (more than $10 mil­lion).

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