As the market bounced back slightly from a difficult and volatile start in 2016, advisors noticed their clients becoming less risk averse.

This month’s Retirement Advisor Confidence Index — Financial Planning’s monthly barometer of business conditions for wealth managers — edged slightly upward toward positive territory, rising 2.1 points to 49.2.

The index was pushed upward by advisor optimism about their clients’ appetite for risk. The index’s risk tolerance barometer rose to 36, up 8.1 points from last month. While still in negative territory, the bump in perceived client confidence was supported by a move toward equities and away from cash. Allocations to equities rose 7.5 points to 55.8 and back into positive territory, while cash allocations fell 7.6 points.

With tax season underway, advisors also saw clients becoming more attentive to their retirement contributions. “We saw a little more optimism in our clients this month,” one advisor wrote. “Additionally, people are contributing to their tax-deferred accounts in order to maximize deductions prior to filing their taxes.”
Another advisor said: “The January sell-off was overdue. ... It is my duty as a fiduciary to advise my clients that was a good opportunity to buy, not sell. Thus far, this has been an excellent recommendation. Most clients, though fearful, understand the thoughtfulness.”

However, advisors noticed clients still had reasonable cause for concern. Many advisors reported their clients were stressed out about the upcoming election, oil prices and Social Security changes. “The election is a concern and keeping some people heavier in cash,” one advisor wrote.

“Many of my clients are still [struggling] to comprehend the new Social Security laws around file-and-suspend,” another advisor added. “Not very happy is an understatement.”

There were some advisors who said clients were able to take tactful advantage of economic downturns. One advisor was pleased that clients took advantage of the market pullback. Another said falling fuel prices provided clients with unique opportunities: “We are pleasantly surprised to see that our more knowledgeable clients are turning their gas savings into larger contributions to their retirement plans.”

The Retirement Advisor Confidence Index is composed of 10 factors — including asset allocations, investment product recommendations, economic and risk factors, taxes and planning fees — to track trends in wealth management. RACI readings below 50 indicate deteriorating business conditions, while readings over 50 indicate improvements.

Maddy Perkins

Maddy Perkins

Maddy Perkins is the Assistant Managing Editor for Financial Planning, Bank Investment Consultant and On Wall Street.