American financial experts like to remind investors all the time that “It’s The Economy, Stupid”, but in the winter of 2018, it was the global economy which drove the American stock market to act with remarkable volatility.
An anticipated bump from the new tax laws introduced at the end of 2017 gave rise to a stunning jump in the stock market in January, but continued conflicts related to tariffs threatened against NAFTA partners Mexico and Canada plus concerns over the bond market drove stock market prices down in early February. The Dow Jones Industrial Average, which reached 26,616 on Jan. 26, saw a drop of 1052 points over a two-day period that ended with the market at 23,860 at the close on Feb. 8.
It was a time when investors could not take their eyes off the tickers, and business news sites tried to read into every bounce.
It was also a time when investors looked to their financial advisors for advice and counsel. Not all of them received it.
As part of its continual survey of affluent investors, Spectrem asked whether contact from a financial advisor was regularly anticipated during volatile stock market periods, and whether the dramatic changes in January and February 2018 prompted advisors to call investors to provide guidance or offer support for current portfolio decisions.
“Do you traditionally hear more or less from your advisor during volatile stock market conditions?’’ investors were asked, and only 29 percent said they received more contact during those times when the market was moving dramatically. Two-thirds of investors said the frequency of contact did not change relative to the volatility of the stock market.
Specifically referencing the first two months of 2018, only 25 percent of investors said they had more frequent contact from their advisor during that period, while 70 percent said contact did not change despite the nature of the stock market behavior.
And apparently investors are OK with advisors not reacting to stock market volatility by riling up investor clients. Eighty percent of investors said they are satisfied or very satisfied with their advisors as it relates to any response from stock market fluctuations.
In a new study Communicating with Providers and Advisors, investors report general satisfaction with advisors and their communication habits. Ninety percent of investors are satisfied (including 22 percent very satisfied) with advisor communications via electronic newsletter, and 90 percent are satisfied with the frequency of informal e-mail communication.
Where investors report any significant dissatisfaction is with blogs from advisors (54 percent rate their advisor blog efforts “poor’’) and video presentations (36 percent rate advisor video offerings “poor”).
Top Takeaways for Advisors
The information related to stock market fluctuations and communications from advisors is good news for professionals. Investors are not expecting communication from their advisors when the stock market dips or climbs within acceptable norms. Even in the January-February period when the stock market fluctuated almost 3,000 points from high to low, investors generally were not anticipating to hear from their advisor.
That information allows advisors to be selective in who they contact. There are investors on your client list who expect frequent communication, and you probably know who they are. This research indicates you can concentrate on those more demanding investors in times of market flux without worrying that you are ignoring other investors unduly.
©2018 Spectrem Group