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Between market swings, clients see retirement dreams in peril

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In the face of market Gyrations and political upheaval, clients’ risk tolerance has plummeted. Increasingly, they are focusing on short-term volatility rather than their long-term retirement plans, advisers report. In terms of clients’ perceived risk tolerance, the index plunged 14.6 points to 36.7.

Brexit, the sensational U.S. presidential election and falling bond yields in developed nations are factors cited in driving the overall Retirement Adviser Confidence Index — Financial Planning’s monthly barometer of business conditions — into negative territory. At 49.2, the index fell by 3.4 points from the previous month.

The election is another concern, planners say. “Many of my retirees and soon-to-be retirees are getting concerned about … the choice between two seemingly unpopular candidates,” an adviser says.

The dollar amount of all contributions to retirement plans dropped 2.5 points to 55.2, according to the index. The number of retirement products sold to clients also fell, slipping 1.9 points to 51.8.

And while some advisers have pointed to the strength of the economy, others note a downside to U.S. stocks. “Our public equities are expensive,” one adviser says.

Even among ultraweathy clients, concerns about being “extremely vulnerable” to stock market declines jumped 6.1% for the recent quarter, according to Financial Planning’s quarterly Retirement Readiness Assessment, which asks advisers to track their clients’ preparedness. Offsetting that, fewer mass affluent and ultrawealthy clients have reported being extremely vulnerable to significant increases in health care costs in retirement, according to the assessment.

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But managing client anxiety isn’t the only challenge for advisers. Pressure on fees continues to mount. Planners’ fees charged for retirement services fell 1.2 points to 51.8, extending a decline that began in May.

“While I feel that the fees I charge for managed accounts are below the industry average, I believe these fees will continue to experience downward pressure,” a planner says. “I’m exploring new third-party asset management platforms that allow me to offer a lower total fee/expense to the client. This stems from not only robos, but also the new DoL regs that have brought fees front and center.”

The Retirement Advisor Confidence Index consists 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.