Investors’ and advisors’ expectations not aligned

A recent report finds that investors and advisors are not seeing eye-to-eye in several respects

Advisors have to work with clients to help them accomplish their objectives. However, a new study shows differences in perspective that may affect the dynamic between the two parties.

According to a survey conducted by Natixis Global Asset Management, investors are much more confident about the returns they can achieve with their portfolios compared to their advisors. On average, financial advisors see 5.6% above inflation as a realistic rate of return; investors, on the other hand, expect 8.5%. This was determined from a poll of 750 individual investors done in January and a poll of 300 financial advisors in the US done in July.

There’s also a difference with regards to preferred investment strategies. While 80% of advisors think active management is required in times of increased volatility, investors think passive management is called for. The survey found a majority of advisors (75%) who don’t believe that investors truly grasp the risks associated with passive strategies.

A similar divide is seen in wealth management, where 92% of advisors say that they use goals-based planning, but only 30% report their clients asking for such a methodology.

The study also took a look at what issues advisors are concerned about. The biggest concern is regulation, with 86% identifying regulatory and disclosure requirements as the biggest challenges to growing their business. In fact, Natixis says, 27% intend to sell their book of business, merge with another firm, retire, or simply exit the industry, and 10% of advisors plan to outsource investment decisions because of regulation.

Advisors also foresee that new regulations will hurt their clients. 79% say that new regulations will drive up costs for investors, and 37% believe that the increase will force them to desert their smaller clients.

The survey revealed a certain receptiveness to robo-advisors. Eighty-four per cent agree that automated advice is a better model for investors with limited funds, while 51% believe that their own practice can be improved with automated advice. Few perceive automated advice as a threat, with 86% of advisors responding that they don’t believe traditional advice will disappear as a result of automated advice.

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