Adviser concerns high as US election approaches

As many await the results of the US presidential election next week, speculation has spread about how global markets will be impacted, leaving financial advisers fielding client concerns.

According to a new report by Natixis Investment Managers, advisers stated that more than half (51 per cent) of clients have questioned whether they should be concerned about their investments leading up to the election.

Meanwhile, more than half of Australian advisers (53 per cent) believe continued scepticism of election results will have a negative impact on markets, however, 49 per cent think the election results haven’t been priced into markets yet.

These concerns have been further compounded by continued market instability as the world continues its slow recovery from COVID-19, battling high inflation and high cost of living as governments work to prevent a recession.

The subsequent volatile economic market has led to many clients raising concerns to their advisers about whether they will be able to reach their goals (85 per cent), whether they are protected from a market downturn (77 per cent), and what they need to do to outpace inflation (73 per cent).

Given the current state of the market, 39 per cent of financial advisers warned that chasing returns by trying to time the market was the biggest risk for their clients, while also cautioning that, “after an extended run-up in equities, investors should be aware of unrealistic return expectations” (31 per cent).

In planning for the future, 79 per cent of advisers have advocated for fixed income assets for their clients due to diversification benefits. However, nearly half (49 per cent) of advisers said they had faced challenges to increase allocations of this asset class in their client portfolios due to clients’ knowledge or lack thereof.

Almost half (49 per cent) of Australian advisers also reported plans to increase private assets in client portfolios over the next five years.

However, advisers cited difficulty in building a portfolio of private assets at scale was noted as the biggest challenge in doing so (79 per cent), while 77 per cent said that clients don’t understand the holding period that comes with private investment, prompting a need for improved financial education.

Natixis country head, Australia and New Zealand, Louise Watson said the report findings highlight the essential nature of financial advice, with Australians needing an adviser “now more than ever”.

“With the current economic environment creating uncertainty amongst investors, utilising an adviser is one of the best ways Australians can ensure they will achieve their financial goals,” Watson said.

“Amongst uncertainty, it’s important to incorporate defensive assets to protect against the unforeseeable like changes in market sentiment, and as always advisers play a crucial role in educating their clients on market movements, return expectations and across asset classes.”