Last year's market optimism has turned into this year's caution.

RIAs have been making portfolio changes, with more likely on the way. The main trend: reducing exposure to anticipated rising interest rates and the market volatility that could result. 

Last year's TD Ameritrade's Institutional RIA Sentiment Survey found that 60% of respondents expected U.S. stocks to keep rising in the following six months. In the latest survey, released today, of more than 300 RIAs, just 41% said that they saw stocks heading north in the first half of this year. That's the same percentage as those who said that they expect equities to remain about the same.

RIAs had no shortage of concerns.

Rate increases by the Fed led the way, cited by 84% of respondents. But rising rates were closely followed by worries about a corporate earnings slowdown, weak job growth, economic woes in China and a stronger U.S. dollar, all of which were mentioned by between 73% and 81% of advisors.

Not everyone is concerned enough to make changes now. "Nobody can predict the future, so we're sticking with the asset allocations we've developed for our clients," says Erika Safran of Safran Wealth Advisors in New York. "However, I have had to reassure some clients that they'll have enough money."

Yet others have already begun. To protect clients from a possible market downturn, 64% of the surveyed RIAs said they have stepped up shifts in asset allocation, moving clients to less-volatile assets. Other actions include moving out of bonds and other rate-sensitive assets (mentioned by 45% of RIAs), while 38% of RIAs said that they are selling securities and rotating into cash.

Altogether, 79% of RIAs reported adjusting asset allocations to accommodate what is expected to be a rising interest rate environment in the U.S.

Such moves may turn out to be prudent, or they could result in lost opportunities for higher returns. Regardless of how 2016 plays out, selling securities after a six-year bull market could trigger tax consequences, so advisors may want to keep an eye on the ever-present tax tail as well.

Donald Jay Korn is a New York-based financial writer who contributes to Financial Planning and On Wall Street.

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