After an autumn of discontent, Financial Planning's Retirement Advisor Confidence Index - a monthly barometer of business conditions for wealth managers - has surged in the new year, with sharp rebounds in risk tolerance and equity investments.
The index, based on a Financial Planning survey of planning professionals, registered 57.5 for February and (due to an adjustment to make the index more current) a revised 56.1 for January, after several months hovering between 48 and 53. RACI readings below 50 show a decline relative to the prior month; numbers above 50 indicate expansion.
Advisors reported a sharply higher risk tolerance, with a jump in equity investments and a drop in cash. "Clients seem to be more optimistic than they have been in some time," one advisor said.
At the same time, planners said clients now had a higher annual tax liability - a negative indicator with a silver lining for advisors. "The higher taxes expected in 2013 [are] leading to more planning opportunities," one respondent said.
The RACI is composed of 12 factors - including asset allocations, investment product recommendations, client recruitment and retention, economic and risk factors, taxes and plan fees - to track trends in wealth management business cycles.