BOSTON, Oct. 28, 2014 /PRNewswire/ -- Volatility continues to be a top concern of financial advisors and their clients, according to Eaton Vance's quarterly Advisor Top-of-Mind Index, released today. With a backdrop stock market instability, geopolitical unrest, and weakening global growth, advisors said their clients' concerns about "protecting their wealth from market volatility" increased this quarter, with a rating of 103.6 on the Index (up from 102.2 last quarter).
"Generating income" fell to second place on the Index with a 99.7 rating, down from 105.1 in the previous quarter, as advisors expressed increasing complacency on rising interest rates. "Capital appreciation" trailed with an 85.5 rating, and "reducing taxes" rated 82.0 on the Index.
"Investors are very nervous," said Bob Cunha, managing director of Eaton Vance Distributors. "Most investors have witnessed extreme highs and lows over the last fifteen years, which led to losses for many – now investors are apprehensive about what's next and unsure where to turn. They're focused first and foremost on protecting their hard-earned dollars in a time of big market swings."
Nonetheless, many investment managers see market volatility as potentially beneficial. Richard Bernstein, chief executive officer of Richard Bernstein Advisors, LLC and sub advisor of several Eaton Vance mutual funds, believes uncertainty equals opportunity.
"It's not volatility itself that leads to poor performance, but rather it appears to be investors' emotional reactions to volatility," said Mr. Bernstein. "History suggests the best investment opportunities are in out-of-favor asset classes and sectors. We advocate taking a long-term investment view and not quickly reacting to market moves. This will help ensure investors are appropriately positioned to effectively manage portfolio risk."
Kathleen Gaffney, co-director of investment grade fixed income at Eaton Vance agrees.
"Uncertainty has often led to opportunity for investors because that is where value has tended to be over the years," said Ms. Gaffney.
Another source of market uncertainty contributing to overall advisor/client unrest is the ongoing debate about when interest rates will rise and how the market will respond to the end of quantitative easing.
Advisors are split on when the expect rates to rise with 52% of those survey indicating they expect rates to go up in 2015 and 48% stating that rate hikes won't take place until 2016 or later.
"While we don't know the exact timing of rate hikes, we know interest rates will go up and investors should be prepared," said Ms. Gaffney. "With ultra-accommodative monetary policy coming to an end, it makes sense to hunt for good relative values across a broad range of asset classes, particularly in non-traditional places. Taking a multisector approach allows me the flexibility to pull different levers as market conditions change."
Eaton Vance's quarterly Advisor Top-of-Mind Index measures the overall importance of key issues facing financial advisors and their clients, combined with how fast these issues are increasing in importance. It is part of an ongoing study designed to help identify the key investment themes and concerns clients are commonly raising with their advisors.
Eaton Vance Advisor Top-of-Mind Index Methodology
The Advisor Top-of-Mind Index is calculated based on the findings of a survey of 204 financial advisors from a diverse group of companies. Eaton Vance contracted with a third party to conduct the online survey from September 11 – September 23, 2014. The Advisor Top-of-Mind Index uses a similar methodology as the U.S. Consumer Confidence Index* (which has no affiliation with Eaton Vance) in that it calculates a weighted average of current perceptions (40% of the Index) and what advisors think about the trends (60% of the Index). The Index set a baseline average of 100 for April 2014. Each component measured is tracked quarterly to illustrate changes in advisor perceptions and changes in trends over time. Future surveys will sample different financial advisors and may produce different results.
Eaton Vance Corp. (NYSE: EV) is one of the oldest investment management firms in the United States with a history dating back to 1924. Eaton Vance and its affiliates managed $293.6 billion in assets as of September 30, 2014, offering individuals and institutions a broad array of investment strategies and wealth management solutions. The Company's long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of today's most discerning investors. For more information about Eaton Vance, visit eatonvance.com. Follow us @eatonvance.
* The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The consumer confidence index was started in 1967 and is benchmarked to 1985=100. The Index is calculated each month on the basis of a household survey of consumers' opinions on current conditions and future expectations of the economy. Opinions on current conditions make up 40% of the index, with expectations of future conditions comprising the remaining 60%.
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Eaton Vance Distributors, Inc. Member FINRA/SIPC
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800.225.6265
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