In the darkest days of winter, advisors found their clients getting increasingly nervous about their investing strategies.
Weighed down by an eight-point slide in perceived client risk tolerance, the Retirement Advisor Confidence Index — Financial Planning’s monthly barometer of business conditions for wealth managers — fell 1.8 points in January to 52.2 after reaching a five-month high last month.
Indeed, client risk appetite slid into negative territory, at 47.2 points. (RACI readings of less than 50 indicate declines relative to the previous month, while readings of more than 50 indicate expansion.)
Other factors that weighed on the index included a shift in emphasis away from equities and toward cash.
The culprit appeared to be concern over a weakening global economy. “Obviously, global events have had an effect on global economics,” one advisor wrote, while adding, “That said, we try to steer our clients away from such volatility.”
A mitigating factor in the broader index was an overall increase in retirement planning activity at year-end. Asked to focus on December activity, advisors reported a significant jump in total contributions to retirement plans.
“Clients made higher contributions in December to max out retirement plans by year-end,” explained one advisor.
The Retirement Advisors Confidence Index is composed of 10 factors — including asset allocations, investment product recommendations, economic and risk tolerance factors, taxes and planning fees — and tracks trends in wealth management business cycles.