But will it get them to the needed amount of retirement income?
New research from Boston-based research and consulting firm Cerulli Associates finds that when asked about their actual financial goals, investors are considerably more interested in risk reduction and protection than in aggressive portfolio growth.
“When asked directly whether they would prefer to protect their portfolios from significant losses, even if it means periods of underperforming the market, 77 percent of respondents indicate that they would prefer the safer route,” Cerulli director Scott Smith said in a statement.
“After discussing investor portfolios with platform providers and advisors, there is a consistent fear of looming client defections resulting from performance that lags a benchmark, or index,” Smith added. “But actual instances of this situation remain far more the outliers than regular occurrences.”
Investors are far more concerned with whether they will be okay financially than whether their managers provided a few basis points of alpha, he added.
Of course, the two are related, Smith noted, but in an extended bull market run, the industry has largely focused product development and implementation more on growth than protection.
“Further confounding financial professionals is that the preference for portfolio protection is cited by more than 80 percent of investors under age 40, an age bracket where most providers assume investors are most willing and able to accept portfolio risk,” Smith concluded.
It means that providers must truly consider and acknowledge each investor’s current goals and concerns before attempting to optimize their portfolios.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
