© 2019 SourceMedia. All rights reserved.
Index

Clients are feeling positive — for now

Sponsored by

Flows into retirement plans strengthened as higher stock prices and the end of tax season reassured clients, advisors say.

Product sales, the dollar amount of contributions, and fees for retirement services all advanced, according to the latest Retirement Advisor Confidence Index – Financial Planning’s monthly barometer of business conditions for wealth managers.

The component tracking retirement products sold to clients added 1.6 points to 58, its fourth consecutive gain. Readings above 50 indicate an increase and readings below 50 indicate a decline.

The component tracking the dollar volume of contributions also remained well into expansion territory at 63. Advisors say anxiety over the fall in stock prices at the end of 2018 is fading, and that tax preparation activity and contribution deadlines are powering flows.

FP0519_RACI_Contributions,-Products,-Fees_Online.png

“Higher contributions were seen this month as more clients are finishing up taxes and know how they finished the year,” an advisor says. Another advisor says that the recovery in stock prices emboldened clients to go “back to investing and stick with their plans.”

Advisors also say that the higher contribution limits effective this year are having a favorable effect.

With product sales and contributions bolstering assets under management, the index component tracking fees for retirement services gained 3.5 points to 55.9, its third consecutive increase.

“Generally, the overall business outlook is still rosy,” an advisor says. “Clients desire to continue to place retirement dollars – and other dollars – in long-term investment vehicles.”

These favorable readings on retirement plan flows and fees helped keep the composite RACI in expansion territory at 53.5. The composite also tracks asset allocation, client risk tolerance, investment product selection, new retirement plan enrollees and client tax liability.

FP0519_RACI_Composite_Online.png

Flows into equities continue to be strong, advisors say, with the index component tracking the amount of client assets used to buy stocks remaining firmly in expansion territory at 58.6.

Some advisors note clients are maneuvering to reduce downside exposures within portfolio categories, however. “Clients are seeking ways to manage risk after the market had a fairly good run to start the year,” an advisor says. “That involved having a little more cash on hand, but more just reallocating between risky asset classes and less risky classes.”

FP0519_RACI_Allocations_Online.png

The component tracking client flows into cash remained in positive territory at 51.7.

Overall, advisors say that risk sentiment continues to improve — the component tracking client risk tolerance notched another positive reading at 54.2.

FP0519_RACI_Risk_Online.png

For now, strong jobs numbers and the Fed’s accommodative stance on monetary policy are outweighing warning signs like the yield curve inversion and trimmed projections for economic growth, advisors say. Still, clients are on high alert.

“Market volatility is still a concern for clients, so managing expectations and confirming risk profiles has been key,” an advisor says. “As this market cycle continues to age, the volume of these concerns will go higher.”