Investors Increasingly Wary of Volatile Markets
Turbulent markets continue to trouble investors, prompting financial advisors to rank "managing market volatility" as their top concern for Q1 2016. The 123.8 reading on the Advisor Top-of-Mind Index (ATOMIX) survey is the highest ranking since the index originated in April 2014.
Eighty percent of financial advisors reported that fear is the primary motivator for their clients, up from 51% in Q1 2015, reflecting escalating concerns over the steep increase in volatility across global markets. Additionally, nearly half (44%) of financial advisors polled believed that the likelihood of a U.S. recession by year-end is either moderate or high, underscoring their growing trepidation over the pace and direction of global growth.
John Moninger, managing director at Eaton Vance, believes the volatility spike in the latter part of 2015 and the emotional reaction many investors had to it may be leading to investment actions that work against their long-term goals.
"Market volatility is an output of investor sentiment and history suggests that dislocations caused by volatility can present compelling opportunities for investors who remain calm, evaluate the fundamentals and take a long-term approach to their portfolios," said Moninger. "It's critical for financial advisors to work with clients to understand their life goals and then develop and follow an investment plan together."
The Q1 2016 ATOMIX survey also revealed that despite high concerns about volatility, nearly half (47%) of advisors counsel clients to stay the course through volatile periods and adhere to established plans.
"Investors can be tempted to diverge from a buy-and-hold mentality during periods of heightened volatility," said Mr. Moninger. "Advisors can provide invaluable guidance to their clients by instituting a sound investment strategy and then effectively communicating the value of sticking to that strategy, especially when clients are fearful.” Read more on CPA Practice Advisor.