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Asset Allocation And Rising Interest Rates Top List Of Advisor Concerns



What’s eating at financial advisors now?

Issues surrounding portfolio management and what to do if interest rates rise have become top issues keeping financial advisors awake at night, according to a new survey.

Both topics declined as top-of-mind topics in February but rebounded strongly in March, according to a survey released May 22 by Fidelity Investments.

“We have been tracing advisor sentiment about investing concerns and opportunities for years and have seen dramatic shifts in focus, based on market cycles,” said Scott E. Couto, president of Fidelity Financial Advisor Solutions.

In March, more than 25 percent of advisors considered portfolio management and investment allocation as top-of-mind issues, and nearly 20 percent of advisors considered interest rates as top of mind, the survey found.

Both measures increased as top-of-mind concerns in March over the previous month, the survey found.

Slightly more than 20 percent of financial advisors in March said that issues surrounding bonds and fixed-income were top of mind, down slightly from February, the survey also found. Slightly less than 20 percent of financial advisors said issues surrounding finding yield and generating income were top of mind, also down slightly from February.

Financial advisors, meanwhile, don’t seem worried about inflation. Less than 5 percent of financial advisors indicated inflation was a top-of-mind issue.

“In the first quarter 2014, many financial advisors and their clients were thinking about what to do with their portfolios if interest rates rise,” Couto said in a news release. “Interestingly, they have been less focused on what many consider the ‘flip side’ of rising rates: inflation.”

Rising interest rates make investing in fixed-income portfolios more attractive, but equities have also performed well so far this year. The Standard & Poor's 500 index, which ended Friday at 1,900.53, breached the 1900 level for the first time.

Many economic analysts expect interest rates to rise as the Federal Reserve Bank eases back on its bond buying program. The program, known as Quantitative Easing, was implemented in the wake of the financial crisis to keep interest rates low.

Low interest rates make it easier to borrow and are considered an important tool in spurring a sluggish economy. If the Fed keeps interest rates too low for too long, there is a risk of inflation. High inflation erodes spending power.

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In the first quarter, the top five issues on the minds of advisors had to do with portfolio management and investment allocation, bonds and fixed income, market volatility, interest rates, and finding yield and generating income, the survey found.

The quarterly survey is based on responses from more than 200 advisors.

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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