Investors Distracted From Investing
Investors hire financial advisors for different reasons.
Some do so in order to maximize their rate of return using the acquired knowledge of their advisor. Some do so because it is considered the wise thing to do. Some do so because they are too busy or too uninterested to deal with investing their funds themselves.
But there are some investors who hire a financial advisor and then spend a significant amount of their own personal time watching over their investments and working with their advisor daily to manage the way their investable assets are invested.
However, Spectrem research shows that the percentage of investors who want to maintain a strong level of involvement in the process of investing is dropping.
Evolving Investor Attitudes and Behaviors, a study Spectrem has conducted annually for many years, surveys investors about the way they view investing, personal finance and the financial concerns they have, both nationally and personally. The study segments investors based on different demographic components to see how those differences manifest themselves in investor attitudes, and because the study has been conducted over several years, historical differences can be seen as well.
As a jumping off point, investors are asked in the research if they enjoy investing and want to maintain their involvement. It’s a fair question: some investors do like the process and others do not want to think about their investments after an initial conversation is held to determine what their investment goals are and how to actualize them.
In 2009, 64 percent of all investors said they enjoyed investing. Think about the time period: 2009 was when the American economy was beginning its recovery from the Great Recession. The stock market was still low. There was mild optimism that the economy would be pulled out of the crash it suffered in 2008, but there was no clear knowledge that the mistakes of the past would not produce long-term or permanent effects.
Yet, a majority, almost two-thirds, of investors said they enjoyed the practice of investing at that time.
By early in 2020, that percentage was down to 47 percent, below half. And, when Spectrem asked the question again during the stock market crash caused by the coronavirus, those who enjoyed investing dropped to 43 percent.
Think of your own response to that question. Do you currently enjoy investing? Has your attitude toward that practice changed over time? Are your conversations with your advisor impacted by your change in interest in the subject matter?
Investors were also asked to respond to the prompt “I like to be actively involved in the day-to-day management of my investments” and positive response to that prompt has dropped from 69 percent in 2009 to 44 percent as of April 2020. That means one quarter of respondents have changed their mind about wanting to have a hands-on attitude toward investing.
That begs a couple of questions. Do investors today trust their advisors more so they need less direct involvement? Or has the atmosphere for investing changed in a way that turns off the interest of the individual investor?
Again, consider your personal position. Have you altered your behavior toward the day-to-day management of your investments? And, more importantly, what outside influences have caused you to change your behavior if you have done so?
Responses to these prompts are different based on many characteristics of the investor, predominantly the knowledge of the investor about investing and finances. Eighty percent of the very knowledgeable investors like to manage their accounts daily and enjoy the process; only 21 percent of those who are not very knowledgeable enjoy the minutia of investing and want to maintain regular involvement with the process.
There is no question that changes in processes, including the advancements in electronic transactions and robo-advisor programs, can impact an investor’s interest in the practice of investing. Volatility can also produce different feelings from investors, as some are more likely to prefer a market that maintains steady levels of movement while others enjoy the wild swings the market sometimes makes.
There is no correct or incorrect personal approach to investing in terms of your own involvement in the process. But it is important that your advisor understand your level of interest in what is transpiring, and perhaps why you approach the process in the way that you do.
If, as the study shows, you have lost your zeal for the process of investing, has that impacted your investing allotments? Are you investing less in products that require careful analysis and a watchful eye to make certain you are invested properly? Are you losing out on investing opportunities because of a loss of motivation?
These are questions only you can answer. Your advisor can assist you in adjusting your thinking if you consider it necessary or appropriate.