Advisor Intelligence

A Focus on Personal, Rather Than Macro Is the Way to Go

Advisors may be upbeat about the economic outlook, but now is not the time to have in-depth conversations with clients on the economy. According to a new survey by MFS, a significant number of investors remain skeptical about the economy. 

Only 44 percent of investors are optimistic, while 38 percent are pessimistic about the economy over the next 5 years, according to the MFS Investing Sentiment Insights survey of almost 1,000 investors with over $100,000 in investable assets.  This is drastically different than financial advisors, 79 percent of whom said they were optimistic about the economy.

While clients are likely to ask questions about how the economyas well as the political climate in Washington D.C.is affecting their finances, it’s a no-win game for advisors if they start the conversation looking to bolster clients’ perceptions on the market.

“Get off the macro discussions as fast as you can and get into conversations on clients’ personal finances,” says Doug Orton, vice president of business development for MFS. “People are more pessimistic about these topics,” Orton says, noting that risk tolerance is a lot more time sensitive than advisors would like to think. “Be quick and then refocus.”

The survey also showed that millennials, more than any other generation, are risk-adverse, with 46 percent saying they would never be confortable investing in the market. Millennials—those under 34 years old—also hold more cash and fewer equities, 25.8 percent and 30.5 percent respectively.

 "The textbook says, given their time horizon, that millennials will be all right once the economy improves, but reality shows these 'recession babies' don't trust the markets and have embraced a conservative approach that could prevent them from reaching their long-term financial goals,” says William Finnegan, senior managing director and head of Global Retail Marketing for MFS.

Orton says the millennials’ continued reluctance to aggressively engage in the market affects how advisors should talk to them and what they should recommend.  “Products should be relatively simple,” he says. “They’re skeptical of over-complicated measures—funky, black box strategies, they’re not going to buy into it.”

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Diana Britton

Diana Britton is the Managing Editor of WealthManagement.com and REP. Magazine, covering asset management and independent broker/dealers from all angles. A native of Los Angeles, she now lives in...

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