Clients ‘getting more conservative’ amid COVID-19, election concerns

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Lingering worries about the coronavirus pandemic and upcoming presidential election have retirement savers turning away from equities and growing more risk averse, according to advisors polled in the latest Retirement Advisor Confidence Index, Financial Planning's monthly barometer of business conditions for wealth managers.

"Clients are concerned about the upcoming election and are getting more conservative," one retirement advisor said in the survey.

That sentiment helps explain a sharp decline in investors' risk appetite in September. The RACI component that tracks risk tolerance tumbled 12.6 points in the most recent survey, checking in at 44.4, reversing three straight months of gains and the first score under 50 since May.

RACI scores below 50 indicate a decline in investor confidence, while scores above that mark signify that confidence is on the rise.

With less willingness to take on risk, investors also cooled on equities as part of their retirement plans. In September, the element of RACI that follows their feelings towards equities saw a 5.1-point decline to 57.7, though that was 4.5 points up from the same period last year. Still, like risk tolerance, the drop in confidence in equities ended three consecutive months of gains as clients moved to limit their exposure to anticipated market volatility.

"Many clients have particular concerns around the continuing impact of COVID and who will win the election, and what that will mean for their investments," one advisor says.

Another advisor says clients are operating in a "wait-and-hold mode until after the presidential election. There is a larger focus on risk mitigation."

Of course, anxiety isn't universal, and some advisors report that clients have grown accustomed to the upheaval of 2020 and are actually feeling better about their overall retirement picture.

"Most clients seem unfazed by the turmoil surrounding the country," says one retirement advisor. "It has become simply background noise and is no longer news."

Overall, the composite RACI score checked in at 51.9 in September, off an even point from the previous month but two points up from the year-earlier period.

A few advisors reported that their clients actually seem to be more confident, having perhaps grown inured to the tumult of 2020. "People are used to the 'new normal,'" one advisor says.

Concerns about the election and COVID notwithstanding, several RACI metrics that track retirement contributions have been moving in a positive direction. The RACI components that track new enrollments in employer plans, overall contributions and the total number of retirement products sold to clients all saw monthly increases.

The metric that tracks new enrollees in employer plans checked in at 49.5, up 0.7 points from the previous month and the highest mark since February, the month before much of the economy went into deep freeze in response to the emerging pandemic.

"Although there is still uncertainty with the COVID virus, more people have been going back to work," an advisor says. "This has contributed to more funds being available to invest."

RACI Retirement planning Equities Risk appetite Coronavirus Election 2020 Long term investments