Advisers are split about whether they should revisit clients’ asset allocation in light of tumbling markets.
The start of 2022 has been a shaky one, with strong indications the US Federal Reserve will hike interest rates to put the brakes on rising inflation. Earlier this week, it was revealed US consumer prices had shot up 7.5 per cent in the year to January – the biggest jump in 40 years.
At the same time, tensions over a potential Ukraine invasion and the rapidly-spreading Omicron variant have left many investors feeling nervous, while back home an RBA rate rise is also on the cards.
In late January, the S&P/ASX200 fell to its lowest point in 10 months. While it has regained some ground, it’s still far below its 2021 heights.
As a result, advisers tell us they are increasingly – and unsurprisingly - fielding questions from clients about what it will mean for their retirement savings.
In a poll on the Adviser Ratings newsletter in February, we asked readers “Are the current market conditions making you reconsider your clients’ asset allocation?”
Our respondents were divided, with a slim majority (56 per cent) saying they would keep their clients’ allocation the same, while the remainder (44 per cent) said they would consider making a change.
Consumers report continuing uneasiness
Advisers are no stranger to anxious phone calls or emails from clients, but for some, 2021 required more virtual hand-holding than most years. A major reason for that is that many people still haven’t seen a return to pre-COVID financial stability.
When Adviser Ratings recently surveyed more than 2000 consumers about their money situation, more than a third of pre-retirees who had been affected financially by the pandemic said they still hadn’t recovered.
Meanwhile, the continuation of the COVID-19 uncertainty has kept general confidence in markets fairly low, even before the recent falls.
Despite forecasts of an economic rebound this year thanks to borders, retailers and the hospitality sector reopening, many consumers we surveyed before the market slide said they didn’t have faith things would pick up in the 2022 calendar year.
In fact, in early January, two in five unadvised Australians and one third of advised clients said they felt either ‘not at all confident’ or ‘slightly less confident’ in financial markets than they did a year earlier, according to the results of our consumer survey. Less than one in four advised or unadvised Australians were feeling more confident. Again, this was before the market drop. The disparity between advised and unadvised clients may come down to the advisers’ role in settling clients’ nerves about market volatility.