Major financial events that send markets careening are becoming more the norm than the exception. And while investors are navigating it all the best that they can while seeking a sense of financial wellbeing, these cycles are driving demand for guided advice and comprehensive financial planning.
This data comes from the seventh Advisor Authority study, conducted by The Harris Poll on behalf of Nationwide Retirement Institute, which surveyed advisors, financial professionals and individual investors.
The report found that the Global Financial Crisis of 2008 still ranks as having the most profound impact on investors with investable assets of $100,000 or more (37%), but the financial whiplash brought on by the COVID-19 pandemic comes in second at 28%.
However, the impact of the past 18 months will have lingering repercussions, according to Craig Hawley, Head of Nationwide Annuity Distribution.
“Last year was a powerful reminder that the unexpected can shock the system, re-define our lives and our finances, and have an outsized impact on everything from portfolios and retirement plans to investors’ psyches and their advisors’ practices.”
Improved outlook among ‘sobering’ takeaways bring opportunity
Investors’ financial outlook continues to improve from 36% in 2020, to 49% this year. However, the majority (65%) are still worried about a Bear Market in the next year. Additionally, 61% of investors anticipate market volatility will increase and 69% are concerned about a U.S. economic recession.
A key takeaway from the report that Nationwide called “sobering,” is that 85% of investors continue to say they can do all the right things to manage their finances and still be blindsided by outside events. It’s this sense of helplessness that is bringing an increase in the need for professional financial help.
“Investors’ demand for advice and the need for holistic planning will continue to rise as multiple factors keep chipping away at their confidence, their outlook becomes increasingly uncertain, and goals difficult to achieve,” said Mark Hackett, Chief of Investment Research, Nationwide Investment Management Group.
A whopping 91% of investors who have an advisor or financial professional say that working with their advisor or financial professional helps them feel more confident that they can make the right investment decisions—even during an extreme financial crisis. The number is equally high (89%) for investors who say that having an investing plan for their investments helps make them feel more in control, despite not being able to plan for surprises.
Financial Professionals Bounce Back
It seems that advisors and financial professionals are an overly positive bunch, even after the whipsaw market gyrations of late. The group’s optimistic financial outlook increased 25 points over last year (63% in 2021 vs 38% in 2020). Rising optimism in the face of outsized challenges reveals that advisors and financial professionals have built more confidence than investors after confronting the impact of compounding financial crises. But they share investor doubt, with two-thirds concerned about a Bear Market over the next 12 months, 79% anticipating market volatility will increase and 76% concerned about a U.S. economic recession.
The fact that many advisors have weathered several financial upheavals has likely buoyed their confidence. Seventy percent of financial professionals feel more confident about their ability to help protect their clients’ finances and investments should another crisis arise, compared to only 44% of investors. Financial professionals are also feeling more confident about their ability to help clients prepare for and live in retirement (69%), compared to only 41% of investors. And 65% of them feel more confident about investing their clients’ assets in the stock market, compared to just 38% of investors.