Financial Advisors' Top Concerns: Volatility and Fixed Income, According to new Fidelity® Survey

BOSTON – Fidelity Financial Advisor Solutions today announced the Q3 results of the Fidelity® Advisor Investment Pulse. Managing Volatility took the No. 1 spot for the second straight quarter and Fixed Income and Interest Rates were tied for the No. 2 spot. Many advisors surveyed cited the dual challenge of managing downside risk while also providing their clients with returns in the current low interest rate environment.

"We surveyed advisors throughout Q3 and their focus on volatility remained high even before the ups and downs in the market the past few weeks," said Scott E. Couto, CFA, president of Fidelity Financial Advisor Solutions. "Many advisors fielded calls from clients early last month expressing concern about their portfolios and their allocation to equities."

"But the silver lining for advisors is that this has been a great opportunity for them to demonstrate their value to clients," continued Couto. "They can offer historical context and explain how staying invested in the markets provides the opportunity to fully participate in those rallies. Case in point: two weeks ago, after wide market swings, the S&P 500 posted its biggest one-day gain of the year. Many of the best periods to invest in stocks have been those that were among the most unnerving."1

Couto also suggests that advisors consider using a "bucket" approach with some risk-averse clients where they divide a client's assets into buckets that are specifically focused on certain objectives, including growth, managing risk or preserving capital. The growth bucket would hold mainly equities while the capital preservation bucket would hold less volatile assets such as short-term bonds.

In addition to the concerns around volatility, the Q3 survey indicated a marked increase in advisors' focus on fixed income and interest rates.

"We've also seen this increase reflected in the recent uptick in conversations about fixed income that we've been having with clients recently. In January, we had about 10,000 conversations, and in September, we had well over 20,000," said Couto. "There are several strategies advisors can use in a rising rate environment, specifically shortening the duration, adding municipal bonds, exploring non-core income options, and anchoring their clients' portfolios with high-quality bonds." The Fidelity® Advisor Investment Pulse is a survey that captures the investment topics on the minds of 250 advisors in order to share common concerns and deliver resources to help them navigate changing market conditions.

Fidelity offers a range of insights that can help advisors navigate these market fluctuations. For access to the insights and resources that Fidelity offers, advisors can visit: advisor.fidelity.com/investmentpulse. They include:

  • Is Loss Aversion Causing Investors to Shun Equities? – Fidelity's asset allocation and behavioral economics experts look at how investors are affected by loss aversion – in which the pain felt from a loss is about twice as strong as the pleasure felt from an equivalent gain – and how that behavioral bias has prompted some investors to underallocate to equities.
  • Is It Systemic, or Just a Short-Term Shock? – Fidelity's director of global macro research looks at the impact that external shocks and negative headlines, such as geopolitical events and excessive leverage, have had on the financial markets.
  • Managing Client Emotions in Volatile Markets – This online resource includes interactive charts and insights about volatility and historical market performance across various market environments which advisors can leverage to remind clients that long-term investing takes time.

About the Fidelity Advisor Investment Pulse

The Advisor Investment Pulse is an ongoing primary research effort that captures the views of more than 1,000 FFAS advisor clients annually. All FFAS advisor clients in the broker-dealer and registered investment advisor communities are asked to participate in the online survey. Respondents are asked an open-ended question: "Thinking about the investing environment and outlook, and the potential impact on your client portfolios, what investment challenge or opportunity would you say is top-of-mind for you right now?"

The survey reports "Top of Mind" themes of most concern to financial advisors in both their practices and in the financial markets. These themes are distilled from individual financial advisor comments. The chart reflects the most current five themes that represent the most widely held views. Given the variability of the number of responses over time, and the ongoing nature of this effort, confidence levels also will be variable.

Fidelity Financial Advisor Solutions has been tracking advisor sentiment about investing concerns and opportunities since April 2012. This proprietary research enables Fidelity to provide advisors with timely perspectives from their peers, and offer tools to take advantage of the investment opportunities that exist today.

About Fidelity Investments

Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $4.9 trillion, including managed assets of $2.0 trillion as of September 30, 2014, we focus on meeting the unique needs of a diverse set of customers: helping 23 million people investing their own life savings, 20,000 businesses to manage their employee benefit programs, as well as providing 10,000 advisors and brokers with technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit www.fidelity.com.