“Every cloud has a silver lining,” as they say, and a decade after the 2008 financial crisis, its bright side has become clear. If nothing else, 401(k) participants and investors alike are now better poised for the next market downturn.
The reason? Post-2008, Americans’ perspectives about finances shifted, new data suggest, paving the way for better investment-related decisions.
In its Financial Crisis 10-Year Anniversary Poll, Nationwide Advisory Solutions surveyed 370 registered investment advisors (RIAs) and fee-based financial advisors about consumer behaviors post-Great Recession. Findings indicated:
- 74 percent of advisors agree that retirement savers and other investors are more likely to work with a financial advisor now than they were before 2008;
- 90 percent say clients are also more likely to listen to advisors’ guidance;
- 89 percent think consumers are more likely to be transparent about their financial situations;
- 84 percent believe 401k savers and other investors are more willing to create and stick to financial plans; and
- 60 percent say American investors are more likely to ask for advice that’s in their best interest or aligned with a fiduciary standard.
Perhaps a product of paranoia—the majority of advisors feel clients today are more concerned about a future market crash (84 percent) and more worried about market volatility (79 percent)—this markedly different behavior is a good thing, right?
Well, maybe not all of it. In some ways, investors may be over-correcting. For instance, almost seven in 10 (67 percent) advisors say the crisis left many investors more risk averse than before. While certainly understandable from a psychological perspective, conservative investing is apt to yield conservative returns that make securing a successful retirement that much more challenging.
Further proof of their recession-induced PTSD, Americans also want to know exactly what investing is costing them. Advisors say 56 percent of 401k participants and other investors are more likely to focus on products’ price and 51 percent are more likely to ask how advisors charge for their services.
Fortunately, it seems many advisors are doing their part to quell investors’ financial fears.
“RIAs and fee-based advisors have adapted to the needs of the post-financial crisis investor by adopting a more holistic approach, aligning the products and tools they leverage to meet investors’ concerns and proactively communicating about market risk and movement,” Craig Hawley, head of Nationwide Advisory Solutions, explained in a statement.
Results of the poll show:
- 79 percent advisors are proactively communicating with clients about market conditions;
- 73 percent have increased their focus on holistic financial planning for clients;
- 60 percent are more upfront about their compensation model; and
- 57 percent have also increased their focus on an independent fee-based approach to managing their practice and serving clients.
Lastly, the most responsive financial professionals are adjusting their strategies to address “investors’ concerns about minimizing risk and protecting their assets, as well as their desire for guaranteed income in retirement,” added Hawley.
Fifty-six percent of advisors polled say they are increasing their use of dividend-yielding stocks, 41 percent are upping their use of yield-generating ETFs and 37 percent enhancing their use of variable annuities with guaranteed living benefits.
And “[t]o hedge against market risk, RIAs and fee-based advisors say the top three products which they are using more since 2008 include liquid alternatives (45 percent), fixed index annuities (43 percent) and fixed annuities (31 percent),” Nationwide’s report concluded.
Jessa Claeys is a writer, editor and graphic designer.