Volatility and Political and Regulatory Changes Surge as Concerns, Latest Fidelity® Advisor Survey Reveals

Advisors May Create Opportunities by Helping Clients Focus on the Long Term, Reinforcing the Importance of Diversification, and Developing a Plan to Respond to Regulatory Changes

BOSTON — Financial advisors were most concerned about market volatility in Q1 2016, according to the latest Fidelity® Advisor Investment Pulse study. Nearly 30 percent of advisors cited it as an area of focus, a significant rise from less than 20 percent in the previous quarter. Survey results also reflected advisors' increasing attention on the election season and the Department of Labor's (DOL) investment advice rule1, as developments in the political and regulatory landscape emerged as an important consideration, taking the No. 3 spot in Q1. The latest results of the quarterly survey were released today by Fidelity Institutional Asset Management, a distribution and client service organization dedicated to meeting the investment needs of financial advisors, institutions and consultants.

Portfolio management also featured as a top-of-mind-theme for advisors, taking the No. 2 spot. On the other hand, concerns about interest rates fell significantly, tumbling from No. 2 in Q4 2015 to the No. 7 spot in Q1 2016. While approximately one out of every five advisors surveyed in the previous quarter cited interest rates as a concern, the number dropped to fewer than one in ten in the first quarter of this year. Interest rates had consistently been one of the top five topics for advisors every quarter for more than two years.

Don't Confuse Volatility with Risk

"There is no question that the market had a volatile start to 2016, so it's no surprise that volatility was a top concern for advisors in the first quarter, particularly in January," said Scott E. Couto, president, Fidelity Institutional Asset Management. "Volatility can be uncomfortable, but advisors shouldn't allow short-term events to dictate changes to long-term strategy."

"It is important for advisors to focus on what they can control," added Couto. "This starts by helping clients look at longer-term horizons, and by having a plan to invest through market fluctuations."

Advisors play a crucial role by encouraging clients to avoid locking in losses by bailing out at the first sign of volatility, particularly as markets have proven themselves to be resilient over time. In the wake of the most recent recession, from March 2009, the U.S. stock market generated a five-year return of 178 percent. Similarly, after a dramatic period of Fed tightening, the market generated a five-year return of 251 percent from December 1994.2

One of the key ingredients to encouraging clients to stay invested through volatility is having a diversified3 portfolio across stocks, fixed-income and short-term products. Advisors may consider investment-grade bonds to help provide downside protection, as these have historically demonstrated a negative correlation to stocks. Even in a rising interest rate environment of more than 40 years between 1941 and 1981, bonds provided an average return of 3.4 percent.4 A multi-sector bond strategy may provide higher risk-adjusted returns than any other individual bond sector while exhibiting much lower volatility than high-yield.

Turning Focus on DOL Rule into Competitive Advantage

Anticipation of the final DOL rule on investment advice, issued in April, played a significant part in driving the increased focus among advisors on political and regulatory developments.

Advisors who develop an effective plan, aligned with their firm's response to the rule, may be able to create a competitive advantage for themselves. They may evaluate their business by determining account transition plans, establishing a framework to discuss the impact of the rule with clients, and discussing asset consolidation. This may also be an opportunity for advisors to reaffirm their value to clients and identify options to potentially scale portfolio management.

Fidelity Institutional Asset Management offers advisors original insights aimed at addressing their top concerns. The resources aim to support client discussions and cover topics such as managing through current market dynamics, capturing opportunities created by the Department of Labor's investment advice rule, and the value of active management. To access these insights from Fidelity, visit: advisor.fidelity.com/investmentpulse (for financial advisors only). Resources include:

  • Market Volatility: Fundamentals for Investors – While market volatility can be unsettling, it is not unusual. Two basic principles can help advisors navigate through volatility.
  • Myth: Always Avoid Bonds When Rates Rise – When rates rise, bond prices fall – that's the traditional view regarding fixed-income. With government yields near historic lows, many investors are concerned about the interest rate risk in their portfolio.
  • Understanding the DOL Investment Advice Rule – Advisors can leverage Fidelity's insights to position their business to capture opportunities created by the DOL Investment Advice Rule.

The Fidelity Advisor Investment Pulse is a survey that captures the investment topics on the minds of around 250 advisors in order to identify common concerns and deliver resources to help them navigate changing market conditions. Fidelity 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 the Fidelity Advisor Investment Pulse

The Advisor Investment Pulse is an ongoing primary research effort that captures the views of more than 1,000 Fidelity Institutional Asset Management advisor clients annually. All Fidelity Institutional Asset Management advisor clients in the broker-dealer and registered investment advisor communities are asked to participate in the online survey. These advisors serve a range of clients, including individual investors, businesses, plan sponsors and institutions. 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 will also be variable.

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 $5.2 trillion, including managed assets of $2.0 trillion as of March 31, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

Our Company

Personal Investing

We provide financial planning and retirement options such as IRAs, annuities, and managed accounts; brokerage and cash management products; college savings accounts; and other financial services for millions of individual investors.

Workplace Investing

We work with employers to build benefit programs for their employees, and provide recordkeeping, investments, and servicing in defined contribution, defined benefit, health & welfare, and stock plan services.

Fidelity Institutional

We bring sophisticated technology and highly personalized service together to offer clearing, custody, investment products, brokerage, and trading services to a wide range of financial firms.

Fidelity Institutional Asset Management

Fidelity Institutional Asset Management is a distribution organization dedicated to the institutional marketplace. It serves consultants and institutional investors, such as defined benefit and defined contribution plans, endowments, and financial advisors.

Fidelity Charitable

Fidelity Charitable is an independent public charity that allows donors to establish a dedicated donor-advised fund to support their favorite charities in the short term and create a systematic plan for longer term philanthropic goals.

Fidelity Labs

Fidelity Labs explores emerging technology and harnesses innovation to benefit Fidelity's businesses and customers.

Discovery Ventures Program

The Discovery Ventures Program is a program focused on startups looking to grow their businesses in the financial services industry. The program is designed to help participating companies better understand how to engage with large enterprises so that they can accelerate their sales into large enterprises and significantly increase their growth.

Careers at Fidelity

Fidelity Careers Sales, relationship management, product, marketing, technology, operations, and corporate functions


Asset Management Careers Investment management and support