Financial advisers proved their worth in the second half of 2008, with their clients' average returns 16 percentage points higher than the S&P 500, Fidelity found in a survey of 300 investors and 200 advisers.

Investors lost an average of 27% between Aug. 27, 2008 and Feb. 27, 2009, while the S&P 500 dropped 43% in that period.

However, investor reviews on that advice were mixed, with 32% of investors saying their advise minimized investment losses during the past six months, and 24% saying they failed to do so. Nonetheless, most advisers said their clients didn’t panic during the market’s steep downturn at the end of the year.

“The fact that investors differ in their opinions about how their adviser performed shows just how challenging this market has become for advisers,” said Charles G. Goldman, president of institutional platforms at Fidelity.

“While this is undoubtedly one of the most challenging market environments this generation of advisers has ever experienced,” Goldman continued, “it’s encouraging to see that 96% are optimistic about their future growth prospects. The environment also has reinforced that this is a relationship business built on communication and trust between advisers and their clients.”

Most notably, advisers said that their clients now have more realistic expectations and are seeking more advice, and that they have been able to pick up business from other advisers who didn’t do so well for their clients. Thirty-eight percent said they have strengthened client relationships because of the financial crisis, and 72% said they have increased client communication.

Certainly, the thrust of that communication has changed, with 52% of advisers saying they are reassessing their clients’ risk tolerance and 37% directly discussing risk with their clients, and 21% reviewing their clients' investments.


“Times of economic and market uncertainty bring opportunity for those willing to look for it,” Goldman noted. “This is especially true for advisers. The need for professional investment advice has never been greater. Advisers of all types have a once-in-a-lifetime opportunity to position their business for future growth by focusing on areas such as investment processes, client communication or even talent acquisition.”

 

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