While there is still a debate as to whether or not 2022 is a recessionary year, the stock markets have been excessively volatile and mostly bearish.  How does that impact investors and what do financial advisors need to do to make their clients feel confident they are looking out for their best interests?

One of the first questions need to ask is if the risk tolerance of their investors is changing and if so, how should the address any changes?

At the beginning of 2022, Spectrem asked investors of various wealth levels their risk tolerance and found the following:

 

 

 

Not surprisingly, as wealth levels increase so does the risk tolerance of various investors.  The wealthiest investors have the highest levels of risk tolerance with 30% defining their level of investment risk as Aggressive/Most Aggressive.  In contrast, only 21% of those with lower levels of risk define their investment risk as Aggressive/Most Aggressive.

Most importantly, most investors define their risk tolerance as Moderate.  Advisors should be proactively reaching out to investors to make sure they are comfortable with their current investments based upon what is happening in the markets in 2022.

One of the primary reasons investors change financial advisors is because the advisor does not proactively reach out to them.  This is one of the times when advisors need to be regularly contacting their clients to make sure they are comfortable with their long-term strategies during times of short-term stress.