Market Volatility to Continue in 2011 Advisors Caution Investors

Be prepared for more market volatility in 2012. That’s the message 40 percent of financial advisors are giving their clients, according to Russell Investments’ latest quarterly financial advisors survey, the Financial Professional Outlook (FPO).  Fifteen percent are telling their clients to also expect slow economic growth.

The FPO survey was conducted among 300 advisors at 132 firms nationwide. Sixty-three percent of advisors said that market volatility has been a primary topic of conversations initiated by their clients over the past three months, while 78 percent of advisors reported making increased outbound phone calls as a result of the market’s recent swings. Fifty-two percent are having more client meetings and 49 percent report increased incoming client calls.

Not surprisingly, portfolio performance as an increasing client concern, the advisors reported. Forty-four percent said that this has been a primary topic of conversation initiated by their clients over the past three months, up from 32 percent in September and 26 percent in June.

Global events, such as the still unresolved euro zone crisis, are also a more urgent topic of discussion. Forty-four percent of advisors said this is now a topic initiated by both clients and themselves. In September, less than a quarter (23 percent) of advisors said they were initiating discussions with clients on global events, compared with 37 percent who said clients were bringing up the topic. But less than a third (31 percent) said they plan to make global events a focus of conversations about trends for 2012.

What about the other side of the conversation? Market volatility is a primary concern for 71.8 percent of investors interviewed last month by Millionaire Corner, while 43.6 percent said that their financial advisor had offered specific directions on what to do. Advisor direction increased with wealth level and age. While 29.5 percent of those with a net worth under $100,000 said that they had received advice from their advisor on what to do because of recent market volatility, 55.7 percent of those with a net worth of over $1 million reported receiving such advice.

Similarly, 29.5 percent of those under 40 reported that their advisor had given them specific direction on what do, compared with 56.9 percent of seniors over the age of 60.

Specifically, 37.5 percent of investors told Millionaire Corner that their advisor had recommended safer investment choices such as income producing dividends. Age, again, was a factor in this conversation with just 24 percent of those under 40 getting this advice compared to 44.8 percent of those over 60.