Financial Advice in Volatile Markets
Our Global Survey of Financial Professionals reveals how advisor success hinges on offering advice from both sides of the brain.
Advice from both sides of the brain
With the return of market volatility in 2018, financial professionals are meeting rocky conditions head on with solid, left-brained logic. Individual investors, however, are reacting with strong, right-brained emotion. To succeed this year, financial advice will need to come from both sides of the brain – and balance data-driven investment decisions with a solid dose of personal empathy. Our recent Global Survey of Financial Professionals sheds light on how they plan to navigate their biggest challenges in 2018 – and grow their AUM an anticipated 11.6% in the year ahead.
Left brain insights
Evolving markets demand an evolving approach to risk
Has the 9-year bull market left investors complacent? 79% of financial professionals think so. And 70% of institutions agree, saying investors have taken on too much risk in pursuit of yields.1 But as the tides turn, advisors may find it challenging to adjust their portfolio strategy to account for volatility and heightened risk.
How will interest rate hikes affect the markets?
Financial professionals believe that rising rates will have sweeping negative impacts. Far fewer think they will have a positive impact.
Many of the financial professionals we surveyed (40%) plan to counter rising rates by managing bond durations.
Is volatility the biggest challenge?
Coupled with their views on clients’ emotions, volatility could also pose significant business risks.
Get insight into how financial professionals are approaching today’s markets. Download the report.
Right brain insights
Clients need practical education
When markets get volatile and clients get emotional, professional advice is more valuable than ever.
Many individual investors aren’t thinking about risk at all
That may be because they don’t really understand it. More than 8 in 10 say that investors are too focused on short-term performance, and 79% said clients don’t recognize risk until it’s been realized in their investments.
5 ways advisors describe their right brain role with clients
|1. Guiding them through emotional decisions|
|2. Providing ongoing financial education|
|3. Offering guidance on identifying and achieving life goals|
|4. Helping navigate life events|
|5. Helping mediate family financial affairs|
Learn more about how financial professionals can work with clients in volatile markets. Download the report.
Putting it all together in portfolios
Financial professionals need to be ready to counter unpredictable, emotional clients with education and empathy—and well-conceived portfolio strategies to help manage their long-term financial plans. In a market with more questions than answers, clients are looking for asset management expertise to help them identify and capitalize on opportunity.
Many investors misunderstand passive investing
- 6 in 10 investors said they believe passive investments are less risky (62%) and will protect them on the downside (63%).2
- 7 in 10 financial professionals say investors are unaware of the risks of passive (70%) and have a false sense of security about passive (69%).
Alternatives are key
Financial professionals are turning to alternative investments to help diversify and counter risk in volatile markets. 73% of financial professionals globally recommend them to their clients.
Read more about how financial professionals are constructing portfolios. Download the report.
About the survey
Natixis Investment Managers surveyed 2,775 financial professionals in 16 countries in March 2018 with the aim of better understanding the perspectives, challenges, and needs of this key collective of individuals to the financial services industry.
1 Natixis Investment Managers, Global Survey of Institutional Investors conducted by CoreData Research in September and October 2017. Survey included 500 institutional investors in 30 countries.
2 Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research, February-March 2017. Survey included 8,300 investors from 26 countries.
This material is provided for informational purposes only and should not be construed as investment advice.
All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Diversification does not guarantee a profit or protect against a loss.
Alternative investments involve unique risks that may be different from those associated with traditional investments, including illiquidity and the potential for amplified losses or gains. Investors should fully understand the risks associated with any investment prior to investing.
Natixis Distribution, L.P. is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.