Clients conflict with advisors

It defies every stereotype about overly cautious Canadians, with clients increasingly pushing their advisors into a very uncomfortable and possibly dangerous situation.

Clients conflict with advisors
A real rift exists between the client and the advisor when it comes to prognosticating future market returns.

“We are concerned as portfolio managers but are clients aren’t pushing us to be careful,” says Hilliard Macbeth, a veteran advisor with Richardson GMP in Edmonton. “We are being concerned on their behalf and that actually creates some tension because we are always looking for the pathway to balance between risk and reward and fixed income and equities and what the client can handle in terms of their psyche.”

Research bears out the concern.

Schroders Investment Management recently surveyed 20,000 retail investors in 28 countries across the globe. The most surprising finding was that retail investors on average expect to see their investments grow by 12 per cent over the next 12 months.

“Our general response we’re getting from clients overall is that they are not focusing on risk right now,” said Macbeth. “If you go back six years, 2009 was the bottom and they were concerned about risk; today most of that concern [about risk] is gone.”

State Street Global Advisors just yesterday suggested that 57 per cent of institutional investors expect a 10-20 per cent correction in the near future. Despite this view, the pros continue to buy equities primarily because of the lack of alternatives when it comes to generating yield.

So, who’s right? Who has a crystal ball?

Still, advisors used to managing millions in investable assets are experiencing some unease as a result of the unbridled optimism of retail investors.

Especially problematic is the finding by Schroders that 87 per cent of those surveyed are looking to generate an income from their investments.

“People are more concerned about getting their cash to work,” says Macbeth. “They are not really concerned about the risk to the capital but more about the income.”