Financial Advisors Right On The Money

By Cyril Tuohy

InsuranceNewsNet

A majority of financial advisors got the growth numbers right this year.

After the close Wednesday, the blue chip Dow Jones industrial average finished the year at 17,823.07, an increase of 7.5 percent for 2014. The Standard & Poor's 500 index ended the year at 2,059, finishing with a gain of 11.4 percent.

A poll of financial advisors conducted in the spring by SEI found that 76 percent thought the Dow Jones industrials would end the year between zero and 10 percent, and another 17 percent thought growth would be between 11 and 20 percent.

SEI is a Pennsylvania-based asset management and investment processing services for institutional and personal wealth management.

A separate poll of 2,300 financial advisors conducted by the Financial Services Institute (FSI) over the summer found that 43 percent of independent advisors believed 2014 would end with a “strong” stock market performance, 49 percent said the market would be “neutral,” and 8 percent said the stock market will end the year “weak.”

U.S. markets are closed New Year’s Day and reopen Friday.

In a news release issued along with the SEI survey results in June, Steve Onofrio, senior vice president, sales and services, with SEI Advisor network, said optimism among financial advisors reflected the end of the recession’s after-effects.

“It seems like the psychological after-effects of the recession are finally starting to wear off and advisors are becoming more optimistic about the market,” Onofrio said.

“They may not be ready to predict huge returns but even anticipating slow growth is an improvement over where most advisors were a year ago.”

Not only did a majority of financial advisors accurately predict the performance of the stock market this year, but 66 percent of advisors predicted the Republican Party would win back the U.S. Senate from the Democrats, according to the FSI survey.

“Independent financial advisors have their finger on the pulse of politics and policy as Washington and state capitals play an ever-increasing role in their business,” FSI president and CEO Dale Brown said in a July news release.

And on the markets too — at least in 2014.

Interest rates continued to tumble with the 10-year Treasury note falling to 2.17 percent from 3.03 percent at end of 2013. Falling yields boost prices, a trend and analysts said the demand for very safe U.S. government securities remains strong.

At the beginning of last year, analysts had expected rates to rise with the Federal Reserve ending its bond-buying program.

A December report on the state of the industry published by the Insured Retirement Institute (IRI) called the persistently low interest rates in 2014 a “significant headwind.”

Despite the low interest rates, many parts of the industry are in good shape, said IRI president and CEO Cathy Weatherford.

“Fixed index annuities and immediate and deferred income annuities are showing especially strong growth as the industry is poised to begin 2015 in a strong financial position and with favorable public policy support,” Weatherford said in a news release.

With more Americans becoming aware of the value of guaranteed income in retirement, the life and retirement industry is in a good position to innovate and develop new products to meet the demand, she said.

The IRI’s “State of the Industry” report said that industrywide annuity sales are on track to reach $225 billion in 2014, an increase of 3 to 5 percent over 2013. Sales of $225 billion would be the highest level since 2011, the report said.

The IRI report also cited a Moody’s Investors Service report out earlier this month that found the life and retirement industry with strong operating liquidity. The Moody’s report said the industry had resources equivalent to 2.6 times the industry’s needs.

In 2008, the industry only had two times its needs.

Cyril Tuohy is senior writer for InsuranceNewsNet. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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