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Retirement clients get jittery in face of threats to global growth

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Jittery retirement investors are losing their appetite for risk amid concerns about the spread of the coronavirus, according to the latest Retirement Advisor Confidence Index — Financial Planning's monthly barometer of business conditions for wealth managers.

One retirement advisor says clients expressed concerns that volatility sparked by the virus will tip the economy into recession.

"Clients are afraid of coronavirus, the market decline and possible pandemic," another advisor says.

Those anxieties appeared to drive a sharp sell-off at one point as retirement clients shed their equity holdings. In the most recent month, the component of the RACI survey that tracks equities posted a score of 45, down 11.6 points from the previous month and off more than 17 points from the same period last year.

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

The starkest illustration of client sentiment can be found in their appetite for risk. The risk tolerance component of RACI 29.6, down 17.5 points from the previous month. That mark was the lowest score since December 2018.

"Clients are nervous," one advisor says.

Another advisor reports an uptick in calls from clients particularly concerned with the virus’ impact on markets. “Some elected to either lessen their exposure to stocks or in one instance, get out of stocks entirely."

One advisor sees a silver lining, describing a healthy sort of self-assessment process that clients sometimes experience when markets head south.

"With market downturns, clients are starting to better understand their true sense of risk tolerance, as opposed to assuming they're okay being aggressive," the advisor says.

And not all clients are panicking. Several financial planners say that some of their clients have been viewing the recent volatility as a potential market correction and a buying opportunity.

"The overall market correction has made clients realize there are now buying opportunities, and they want to max out their retirement contributions if possible," one advisor says.

"Market pullback has shaken some confidence but with coaching, long-term clients are making purchases with excess cash," another advisor says.

Overall, the RACI composite notched a score of 46.1, which amounted to a 6.1-point drop from last month and an 8.5-point dip from the same period a year ago.

Several advisors say that they have been counseling clients that short-term market fluctuations should not prompt a fundamental shift in their retirement plans, and, indeed, overall contributions remained robust.

The component of the RACI survey that measures overall retirement contributions posted a score of 59.5, down a modest 3.5 points from the previous month and only a little more than a point off the average for the much in line with the average for the past 12 months.

"Everything is okay, but short-term downticks need guidance and patience to weather the storm," one advisor says.

"We encourage our clients to stay in for the long run," another adds. "They must not ignore current events, but [they] should not let them affect how they view their retirement plans."