Investors Worried More About Election Day than Rates, Recession
This U.S. presidential election brings new challenges and opportunities for financial advisors, as do some longer-term trends such as the shift to virtual interactions and the debate over passive versus active management, according to a new study.
Nearly 70% of investors see the market as “increasingly challenging,” with the 2024 U.S. presidential election being the top concern, cited by 49% of respondents, far outnumbering those concerned about inflation, the risk of recession, or higher interest rates, according to Janus Henderson’s survey of 1,000 mass-affluent and high-net-worth investors over the age of 25.
Amid the worry, advisors may need to dissuade certain clients, particularly elderly investors, from exiting the stock market, according to the study. To do so, advisors should use “historical data that helps put things in context and remind clients that timing the market to avoid downturns often means missing out on sizable gains,” the company stated.
“Despite investors’ concern about the 2024 U.S. presidential election, results haven’t historically been a reason to exit the capital markets,” said Matt Sommer, head of specialist consulting group at Janus Henderson Investors. “In fact, looking back at S&P 500 returns from 1937 through 2022, the average annual return was 9.9% in presidential election years, and 12.5% in nonelection years.”
The survey also discovered that passive techniques are still not as widespread as their active counterparts, and advisors can help clients avoid chasing the next popular trend: 17% of respondents said their investment strategy is largely passive, 29% mostly active, and 37% an equal combination.
The preference for active management is associated with having a financial advisor, as 34% of investors with an advisor prefer mainly active funds compared to 18% of investors without a financial advisor.
Janus also discovered that the “advisor’s mandate is expanding.” In addition to investment guidance, advisors provide “peace of mind,” with 69% of respondents reporting high satisfaction with their financial advisor.
The survey also discovered that investors are more willing to deal with advisors remotely – there was “no relationship” between respondents’ high levels of satisfaction and whether they lived close to their advisor or in another state, Janus noted.
“As video conferencing becomes more entrenched in our everyday lives, geographical barriers are being diminished, providing advisors with an opportunity to tap into a much broader circle of friends, family members, entrepreneurs, and successful professionals as potential clients or referral sources,” said Sommer.
