Many financial professionals spend time amongst themselves talking about issues of risk and return, keeping an eye on the market’s day-to-day movements and tracking the daily performance of major indexes – but evidence suggests that clients think about risk and return differently.

Risk and return from the client’s perspective
According to the Natixis Center for Investor Insight, only one in three investors in the US (32%) describe risk as loss of wealth and only one in five (20%) describe risk in terms of relative performance to a benchmark. Moreover, eight in ten investors we surveyed (84%) tell us they are willing to target returns independent of market returns to get to a successful outcome.1 Six in ten (60%) report being more concerned about getting to a specific financial goal than beating a benchmark.2 Return expectations between individual investors and financial professionals differ as well. Investors we surveyed say they are seeking to achieve real annual returns of 8.9%, while financial professionals report that 5.9% is likely more realistic.3

What can we do to help?
The most important thing a financial professional can do for a client may be to help them build a financial plan. Nearly half of the investors (44%) we surveyed said they don’t have a financial plan in place to help them reach their goals.

Perhaps most importantly, financial professionals may want to drop the jargon they use among themselves when speaking to clients and instead use straightforward language. Investment professionals who speak in dollar amounts and address how to work toward achieving specific financial outcomes may be more likely to connect with their clients than those who cite specific stock performance or recent index behavior.

Clarity is paramount
For financial professionals to maintain a successful business, communication is paramount. In fact, when we asked investors what their advisor isn’t doing that they wished they did, their top responses were “listening to me,” “offering investment strategies that reflect my personal values,” and “clearly explaining their fees.” Those advisors who focus on the investment process and communicate directly with clients about their financial plan and financial goals may be more likely to establish lasting business relationships and expand their practice.

 


1 Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research, February-March 2016. Survey included 7,100 investors from 22 countries, of whom 750 are US investors.

2 Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research, February-March 2017. Survey included 8,300 investors from 26 countries, of whom 750 are US investors.

3 Natixis Investment Managers, Global Survey of Financial Advisors conducted by CoreData Research, July 2016. Survey included 2,550 financial advisors in 15 countries, of whom 300 are US advisors.

This material is provided for information purposes only and should not be construed as investment advice.

All investing involves risk, including the risk of loss

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