FAs are the "steadying voice of reason" for investors

Legg Mason survey shows better results when working with advisors

FAs are the "steadying voice of reason" for investors

Working with a financial advisor brings better results for investors says a new poll.

Global asset manager Legg Mason polled 1,000 investors in the US and found that investors who work with a financial advisor are more than twice as confident they will have enough money to enjoy a comfortable life in retirement.

They also reported more confidence that their investments will perform well over the next 12 months, having more diversified portfolios, less reliance on US stocks, and being more willing to invest in ESG-oriented products.

"By helping investors focus on the long-term, financial advisors can provide a steadying voice of reason. said Thomas K. Hoops, EVP and Head of Business Development for Legg Mason.  "Investing can be a very emotional process, especially in times of market volatility, and an experienced FA is often integral to keeping investors on track to achieving their goals.”

Concerns of clients
The poll also revealed clients’ concerns.

Even among those working with an FA, just 35% of investors reported being "very confident" about having enough money saved for a comfortable retirement. This was three times as many as those without an advisor though.

Of those who were less confident, almost twice as many investors without an advisor (20%) were "very concerned" about having enough saved for retirement, compared to only 11% of those with an advisor.

FAs help deal with volatility
Investors with advisors are more likely to perceive volatility as an opportunity with 44% of respondents stating that volatility is "positive – if managed properly, returns can be higher than usual," compared to 27% of investors without FAs. 55% of FAs agreed with investors in saying volatility is positive.

"Advisors can help deliver better results against key goals and often enable investors to hedge more effectively against downside risks," said Mr. Hoops. "Working with a financial advisor does not preclude investors from acting with conviction and placing money in assets they choose, but FAs more often help them focus on specific goals and investment outcome. Given the strong need to focus on retirement saving our survey exhibits, this is a good thing."

Guided investors more open to diverse portfolios
Those investors that have an FA are also more likely to be open to portfolio diversification.

For example:

  • Real estate: 31% with FA, 18% without
  • Domestic bonds: 24% with FA; 13% without
  • Alternatives: 21% with FA; 12% without
  • Gold/metals: 19% with FA; 11% without
  • International bonds: 14% with FA; 1% without

What the FAs believe are 2019’s best bets
Legg Mason also asked financial advisors for their top investment choices for the next 12 months.

International stocks took top place, followed by US stocks, and alteratives.

"Optimism for alternatives has increased as investors understand the benefits of diversifying portfolios away from stocks and bonds," said Victoria Rock, Head of Alternative Products at Legg Mason Global Asset Management. "Investors are worried about the high valuations in equity markets, and the prospect of low yields in bond markets is causing them to look at other asset classes such as real estate. FAs understand and are leading this trend."