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Volatility Remains Top Concern Among FAs

By Alex Padalka February 17, 2017

Following a turbulent 2016 in which concerns about volatility and growth peaked, advisors are a little less anxious but still say volatility is their main preoccupation, according to the first-quarter results of the Eaton Vance Advisor Top-of-Mind Index (ATOMIX).

The survey, which polled 1,008 financial advisors from various types of firms from December 6 to January 9, concludes advisors are a little less worried than they were last quarter and significantly less so compared to the third quarter of 2016. Advisors scored volatility at 114.5 compared to a peak of 129.7 in the third quarter last year, relative to a 100 baseline when the survey started in April 2014.

But volatility still remains the top concern, as it has been for six quarters running, Eaton Vance writes in the report. Nonetheless, 55% of advisors are bullish about next quarter’s stock market and 56% are bullish about the entire year ahead.

The survey also found a gap between how advisors and clients approach volatility. Among advisors, 54% say they manage and harness it, 17% want to use volatility to their advantage, and 18% just want to manage it enough to avoid losses. By contrast, 48% of clients just want to avoid losses, while only 32% want to manage volatility as well as harness it and 14% see it as an opportunity.

The second top concern among advisors remains generating income, although that worry has also subsided to 108.6 since peaking in the third quarter of 2016 at 122.8, according to the report. The fact that growth concerns follow concerns about volatility indicates that advisors aren’t too far away mentally from their clients. When asked what motivates their clients, 60% of advisors picked fear while 40% picked greed, according to the report.

Compared to last quarter, advisors are noticeably more concerned about growing capital, Eaton Vance writes in the report, ranking it at 92.3 compared to 88.4 in the previous quarter. Nonetheless, that uncertainty, which Eaton Vance attributes to the current political and economic realities, is also far from the peak reached in the third quarter of 2016, when it came in at 103.1.

Finally, advisors are only slightly less preoccupied with reducing taxes than they were in the last quarter of 2016, about the same as they were in the third quarter.