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.
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).