As the end of tax season drew near, clients boosted participation in retirement plans, but their appetite for risk dropped sharply.

Those are among the main takeaways from April’s Retirement Advisor Confidence Index — Financial Planning’s monthly barometer of business conditions for wealth managers. The index slipped 1.1 points for the month to 53.6 after increasing the previous month.

Asked to focus on March activity, advisors said their clients were showing less willingness to take portfolio risk. One characterized it as a seasonal issue related to tax season outlays, however: “Clients typically reduce their risk appetite and number of transactions in March of each year, because they are planning their tax payments.”

Advisors reported slightly more conservative portfolio shifts, rolling off equities and moving toward cash.

Assets allocated to equities remained in positive territory, however, with a rating of 58.3, while allocations to cash stayed in negative territory at 48.1. Perceived risk tolerance tumbled more than nine points. (RACI readings of less than 50 indicate declines, while readings of more than 50 indicate expansion.)

Yet while investor attitudes pulled the index downward, opposing pressures kept it in positive territory overall. One factor was a more than four-point jump in total contributions to retirement plans.

Some advisors reported higher-than-expected contributions this year, yet others again noted a seasonal pattern. “March is always a good month to start IRAs before tax season ends,” one advisor noted. “Starting traditional, Simple [and] SEP IRAs for the tax deduction is a good strategy.”

This month’s index also features the launch of a retirement readiness assessment, which asks advisors to track their own clients’ preparedness.

The new analysis will track such client-related factors as current retirement status, income replacement ability, dependence on Social Security and vulnerability to big economic shifts.

The initial set of data highlighted some key risk factors. In particular, a 65% of mass-affluent clients were described as somewhat or extremely vulnerable to a significant increase in health care costs, while roughly 15% of ultrahigh-net-worth clients would be put at risk by either a significant decline in the equities market or an increase in interest rates.

Advisors also felt that only just over half of their high-net-worth clients would be able to replace their income for a 30-year period — based either on current portfolios or on expected assets by the time the clients retire.
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 business cycles.