The year-end planning period gave advisor confidence a lift, as planners reported higher client risk tolerance, greater retirement contributions and a boost in fees charged.
The Retirement Advisor Confidence Index — Financial Planning’s monthly barometer of business conditions for wealth managers — bumped up more than one point in January to 56.7, its highest level since June.
In part because the survey asked advisors to focus on December activity, index components related to year-end retirement planning got a boost; a 6.3-point jump in retirement plan contributions was the index’s biggest mover, while retirement product sales rose, as well.
“Higher tax rates among the wealthy are leading to increased retirement plan usage,” one advisor who took part in the survey noted. Another respondent saw the retirement contributions as a sign of optimism: “Participants are putting more money into tax-deferred accounts, a sign that they are finally getting past the financial crisis of 2008.”
The overall index score was actually restrained by advisors retrenching on portfolio allocations, however. Although client risk tolerance climbed overall — probably due to soaring stock market performance — respondents said they were decreasing clients’ equity holdings and shifting a bit more to cash. “People seem to believe we are due for a correction and were very willing to take some money off the table,” one advisor noted.
The 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 business cycles.
RACI readings of less than 50 indicate declines, while readings of more than 50 indicate expansion.