Is retirement confidence returning?
Key indicators of retirement confidence have plunged to all-time lows as the economy enters a deep freeze at the hands of the coronavirus pandemic, however some hope of a rebound still remains, according to the latest Retirement Advisor Confidence Index — Financial Planning's monthly barometer of business conditions for wealth managers.
Advisors polled by Financial Planning report that while investors remain rattled often in financial distress, there are faint signs of economic revival.
"As people start back to work and earning more money, I see things heading back towards normal," one retirement advisor says. "But overall I have seen a great number of businesses suffering.”
"Clients felt more comfortable investing as the market moved significantly off of the lows," says another advisor, citing a strong period of investment returns. "Clients felt the momentum would continue."
That spirit of cautious optimism is represented in a number of RACI metrics that posted modest upticks from the previous month, but were still well below the same period a year ago.
The RACI component that tracks overall contributions to retirement plans saw a score of 42.7 in the most recent period. That amounted to a 12.5-point drop from a year ago, however up 1.5 points from the previous month, when overall contributions hit an all-time low.
RACI scores higher than 50 signify an increase in client confidence, and scores under that level denote a drop in confidence.
Overall, the composite RACI score checked in at 45.2, an increase of 1.7 points over the previous month, reversing three consecutive monthly declines. The composite score was down 4.9 points from the previous year.
Despite those modest improvements, advisors report that retirement confidence continues to slump amid the ongoing economic fallout from the pandemic.
"Everything that we are dealing with as it pertains to COVID-19 has made things quite uncertain and people become much more concerned with their investments," one advisor reports.
"It's been very up in the air," says another advisor, describing "having to reassure clients that everything will be OK when they're worried about their assets."
Advisors report a modest increase in the overall number of retirement products sold, amounting to a score of 37.4, up 2.5 points from the previous month's all-time low. Still, that mark was off 11 points from last year; the second time that score checked in below 40.
"Most people were more worried about COVID-19 and the immediate future than retirement," one advisor says.
Even as overall retirement contributions and product sales saw a slight rebound, the escalating unemployment rate yielded a predictably bleak score in the category that evaluates new participants in employer-sponsored plans. The RACI component that tracks that metric checked in at 35.3, all all-time low that was off 2.8 points from the previous month and down 17.7 points from last year.
"Employees [are] filing for unemployment and obviously not making the payroll contribution to a retirement plan," one advisor says. "Companies are dropping the match. Fears of inflation, no income, COVID — [it] is a poor environment for investing."