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Retirement confidence rebounds though fears of recession persist

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After a recent spasm of anxiety, clients saving for retirement are channeling money back into that strategy with what appears to be a renewed appetite for risk, according to the latest Retirement Advisor Confidence Index — Financial Planning's monthly barometer of business conditions for wealth managers.

Following a dismal month that saw investors' risk tolerance plunge to the lowest level of the year, the more recent month "returned to normalcy with consumer confidence in regards to investing and risk tolerance," one retirement advisor says.

Planners reported a sharp increase in overall dollars contributed to retirement accounts, accounting for a RACI score of 60.2, a 5.6-point increase from the previous month, and marking the first time since April that component of the index posted a mark of 60 or higher.

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RACI scores below 50 indicate a drop in confidence, while scores above that mark signify an increase.

Some increased asset movement may be attributed to the turning of the calendar. With the end of the year approaching, one retirement advisor notes, clients are thinking more about their tax picture.

"As we get closer to year-end, more clients begin SEP IRAs and traditional IRAs to begin contributions and lower 2019's tax liability where possible," the advisor says.

The overall composite index checked in at 49.9, reversing two months of decline, to edge back toward the 50-point threshold — one which the index had consistently topped for the first half of the year.

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The most recent month's composite was off 1.7 points from the same period last year.

Among asset classes, equities were the biggest mover in the most recent RACI survey. Retirement assets used to purchase equities surged to 53.2, up 8.6 points from the previous month, and the highest score since June.

Investor anxiety calmed considerably in the most recent month, as the RACI component that tracks risk tolerance spiked 9.2 points from last month, clocking in at 41.2.

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Despite that impressive rebound, this latest month's risk tolerance score was still the second-lowest mark of the year, and down 5.9 points from the year-earlier period.

"Market confidence has seen a modest increase," one advisor says. "However, we still are wary on investing new money across the board."

Indeed, despite current numbers generally showing an uptick in confidence from the prior period, retirement advisors continue to report that clients are concerned about uncertainty in global markets fueled by trade wars and other geopolitical factors, all of which, clients fear, could culminate in a sustained global slowdown.

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"Clients are a bit edgy regarding the future of their investments," one advisor says. "Many are concern[ed] about an upcoming recession."

Some advisors are working to convince clients that, even if a downturn or market correction is in the offing, that doesn't mean the sky is falling.

"It is likely that investment returns across spectrum of asset classes may be somewhat lower in the years ahead," one advisor says. "Education of clients will be important in such an environment as well as making sure we as advisors understand their true objectives."