The survey, sponsored by
However, these themes could prove to be challenging conversations for advisors, as more than two-thirds (69%) say they often find themselves acting as part psychologist and part financial advisor.
"Clients are not only seeking financial advise from their advisors, but also looking to engage with them on a more personal level," said
Concern for Rising Interest Rates
The survey found that advisors are more concerned than their clients about rising interest rates, by nearly a 2-to-1 margin, and only 7% of advisors say clients are actively seeking advice on the topic. With so few clients actively seeking advice, advisors have the responsibility to initiate conversations to help clients better understand the potential risks rising rates presents to their portfolio.
"While we believe opportunities exist for risk-adjusted fixed income returns, advisors need to initiate conversations about the potential impact of rising interest rates as many of their clients have never seen a significantly down or flat bond market," said
According to Denzler, advisors need to begin by making sure their clients truly understand the basic mechanics of bonds. It's critical to ensure clients have an understanding of how bonds work and how rising interest rates can impact a portfolio first before advisors can engage clients in productive, meaningful client conversations around how to navigate a rising rate environment.
Examining Equity Market Highs
Almost half (47%) of advisors say their clients are well-informed and are open to advice on how to invest more in the equity markets. However, the 2013 run up in equities has created the potential for some clients to have an imbalance when it comes to what is generally accepted as the starting point for a properly diversified portfolio.
"The need to rebalance to client portfolios coming out of 2013's equity market highs should be the starting point for advisors, because the most important thing an advisor can do for a client is to set a properly diversified portfolio based on risk tolerance," said
The survey found that advisors anticipate that clients will agree to a slight increase in allocations to equities (53% of client assets under management (AUM)). However, advisors report that clients will agree to bond allocations of around 24%, which is significantly lower than the generally accepted equities to fixed income ratio for a properly diversified portfolio.