Study examines how financial advisors can help clients weather market volatility - Insurance News | InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Top Stories
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be an INNsider.
  • INN Exclusives
  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • AdvisorNews
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Advisor News
Top Stories RSS Get our newsletter
Order Prints
September 26, 2022 Top Stories No comments
Share
Share
Tweet
Email

Study examines how financial advisors can help clients weather market volatility

Research examines how investors can better weather market volatility.
By Ayo Mseka

Today’s volatile markets have taken a toll on many American investors, who are dealing with inflationary pressures, a threat of recession, and rising health-care costs. Faced with these challenges, investors – their advisors – are looking for strategies on how to stay calm and focused on achieving their short- and long-term financial goals.

As financial advisors work with their investment clients, they may want to consider the types of investments that could help calm nerves, said Laura Varas, CEO and founder of Hearts & Wallets, a market research and benchmarking firm that specializes in consumer saving, investing and financial advice.

“Hearts & Wallets’ qualitative research finds mutual funds seem to be the managed product that provides the most benefit in helping investors handle market volatility emotionally,” added Varas.

Two factors seem to help investors with emotions related to market volatility: 1. Having a professional portfolio manager. 2. Transparent reporting.

Importantly, there is a threshold for the percentage of mutual funds within an investment portfolio that confers an emotional benefit in handling market volatility, according to Hearts & Wallets’ research. An allocation of over 25% in mutual funds in an investment portfolio appears to be the threshold associated with lower difficulty in handling market volatility emotionally, Varas said.

Two factors seem to help investors with emotions related to market volatility, she explained. First, the sense of having a professional portfolio manager. Second, transparent performance reporting. “This is true for mutual funds and, to a lesser degree, other managed products, such as ETFs,” she said.

In addition, financial advisors shouldn’t underestimate the role of having a professional fund manager, Varas said. “Our research finds growing consumer interest in the managers behind investment products.

High consumer interest in the managers behind their investment products jumped 7 percentage points nationally to 36% of households in 2021, up from 29% in 2020, according to Varas. (Note: High interest includes scores of 8-10 on a 10-point scale.)

The spike in interest in the “investment companies [who] managed my mutual funds” was the highest among younger investors, said Varas. Interest was up 13 percentage points to 44% in 2021 from 31% in 2020 among ages 35-44, and up 14 percentage points to 37% in 2021, from 23% in 2020 in ages under 35, Varas added.

Only 16% of U.S. households do not want to know about the managers behind their products. The biggest increases in high consumer interest in the managers behind their investment products occurred in the $25,000 to under $750,000 in investable-asset range, year over year, according to the research.

Understanding perceived investing experience

Something else that financial advisors may want to consider is assessing how experienced in investing their clients perceive themselves to be – as an inexperienced or an experienced investor.

“Our qualitative research finds that more experienced investors are better equipped to handle market volatility. Experienced investors say their real strengths are knowing when to seek help, including financial professionals, and how to judge that help. Experienced investors may manage money on their own, but say they know help is an important element to success,” Varas added.

Inexperienced investors say they are often fearful. These investors can be caught in a mindset of fear, focused on the downside instead of on the upside of investing. They see investing as a game of “guesswork” in which they are passive spectators, even victims, Varas said.

They believe a downside of inexperience may drive poor results, due to panicking, being too cash heavy, or jumping into rallies at the top, she added. Inexperienced investors think that experienced investors devote time to constantly watching markets, even though experienced investors say that they do not.

A financial advisor should work with inexperienced investors to help them understand that there isn’t a “secret sauce” to being an experienced and successful investor, Varas said. “The financial advisor should position himself to be a primary source of information and advice for these investors, recognizing that 43% of households use 7-plus sources today, which is triple the 14% of households in 2010.”

 

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

© Entire contents copyright 2022 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

 

Older

Debunking 5 in-plan annuity myths – and why that matters

Newer

Volatility-proofing your client’s retirement nest egg

Advisor News

  • Bit by bit: Regulators properly target out-of-control crypto companies
  • What will make long-term bonds attractive again? Recession, say some
  • Generation X confronts harsh new reality of retirement: unreadiness
  • Public sector pension plans brace for more economic shocks
  • Advisor trends and challenges for 2023: What’s the next big thing?
More Advisor News

Annuity News

  • Lincoln Financial in settlement talks with ex-agent who sued over FIA returns
  • Annuity sales on steady ‘positive trajectory’ through 2027, LIMRA predicts
  • Venerable to recapture annuity blocks from Athene
  • Indexed, MYGA annuities set Q1 sales record, says Wink
  • Global Atlantic announces $19.2 billion reinsurance agreement with MetLife
Sponsor
More Annuity News

Health/Employee Benefits News

  • Health insurers’ performance stable in 1Q 2023, Fitch reports
  • Merck sues to stop Biden's drug-negotiation program
  • Americans stressed out over paying for health care
  • Washington National adds new accident insurance product
  • MO bill would bar Medicaid from covering gender-affirming hormones, puberty blockers
More Health/Employee Benefits News

Life Insurance News

  • The LGBTQ+ market: A rainbow of opportunity
  • After lagging, life insurance sales on the increase
  • Life insurers’ Q1 profitability stays flat, Moody’s reports
  • Global Atlantic to stop selling new fixed indexed universal life policies
  • Life insurance sales down ‘across the board,’ Wink reports
More Life Insurance News

- Presented By -

Top Read Stories

  • Farmers Insurance the latest to send employees back to the office
  • Global Atlantic to stop selling new fixed indexed universal life policies
  • How insurance professionals can get into trouble with AI
  • How financial advisors can retain clients in uncertain times
  • Succeeding with Gen Z, millennial investors: Key strategies for financial advisors
More Top Read Stories >

Press Releases

  • Insurity and e2Value to Provide P&C Insurers with Straightforward Valuations and Replacement Costs, Enabling Better Risk Management
  • International Industry Leaders Convene at Global Insurance Symposium
  • RFP #T01623
  • Insurity Event Response Guide: P&C Insurers Can Dramatically Reduce Time Spent on Event Response with Intuitive, Proactive Data Analysis
  • Shae Lucabaugh Joins TBX® as Senior Director of Operations
More Press Releases > Add Your Press Release >

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.
Insurance News | InsuranceNewsNet