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Client confidence is up

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With equities markets rebounding and a tax deadline nearing, advisors felt a boost in their clients’ confidence and willingness to contribute to retirement plans.

These factors brought this month’s Retirement Advisor Confidence Index — Financial Planning’s monthly barometer of business conditions — up 5.7 points and back into positive territory, at 54.9, for the first time since December.

Advisors saw an 18.4-point increase in clients’ appetite for risk, pushing the risk tolerance level index up to 54.4, the first positive reading in four months. This confidence boost was helped by an 8.7-point shift in allocations to equities and an increase in retirement contributions, with the total dollar amount of all contributions up 7 points to 64.5.

Generally, advisors noticed their clients seemed more at ease and were less inclined to hold cash as a result.

“Market and economic conditions continued to improve, so clients were more willing to invest,” one advisor wrote.

Several advisors noted the upswing was partly seasonal. With tax season in full swing, advisors said their clients were thinking about their IRAs. “More people are putting money away in IRAs to defer taxes, but at the same time are making cash available to pay their taxes as well,” one advisor noted.

Other findings of the survey indicated advisors had a positive response to how the Department of Labor’s new fiduciary rule would affect their businesses moving forward. One advisor said, “The DoL ruling should help with our process and have us well positioned to grow our firm.”

This month’s index also features Financial Planning’s retirement readiness assessment, which asks advisors to track their clients’ preparedness. The analysis tracks factors including retirement status, income replacement ability, dependence on Social Security and vulnerability to big economic shifts.

The survey tracks activity in the last quarter and shows advisors feeling confident that 23.6% of their not-yet-retired ultra-high-net-worth clients will be able to completely replace their current income over 30 years when they retire. Ultrahigh-net-worth is measured as being worth $10 million or more. Advisors reported 55.5% of high-net-worth clients (worth $1 million-$9.9 million) could replace their income successfully at retirement.

The data also highlighted that should a significant decline in the equities market occur, advisors felt their high-net-worth and ultrahigh-net-worth clients were relatively safe: only 5% and 4% would be extremely vulnerable, respectively. However, 23% of high-net-worth and 14% of ultrahigh-net-worth clients would be considered somewhat vulnerable.

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.