Financial Advisor 2022 Forecast: U.S. Equities Up, but Return to Earth

DELRAY BEACH, Fla.–()–According to the latest survey of 260 financial advisors by InspereX, just 5% of advisors expect a repeat of 2021 with the equity market up 20% or more. The majority (54%) expect the equity market to be up 10% in 2022. Another 28% said they expect a flat market, while 13% are calling for markets to be down 10% or more.

Almost 70% do not see calm equity markets ahead with low volatility and more record highs; in fact, the overwhelming majority (95%) said there could be several equity market corrections in 2022.

The majority of advisors (55%) expect inflation will become a greater challenge, but it will not end the stock market rally. Furthermore, only 21% of advisors believe the impact of COVID on markets is over, while 39% are unsure and 40% said it’s not over.

Asked what their clients are very worried about, 57% of advisors said taxes, 40% said market corrections, and 38% said inflation.

These findings are from the sixth InspereX Pulse Survey conducted online between October 18-23, 2021, by Red Zone Marketing. The 260 respondents represent over 50 broker/dealers, banks, and RIAs. InspereX is the new tech-driven fixed income and market-linked product distribution and trading firm formed from the merger of Incapital and 280 CapMarkets earlier this year.

“While many advisors are modestly bullish on equities, they’re suggesting 2022 could be a rough ride with the possibility of numerous corrections and significant volatility,” said Chris Mee, Managing Director of Market-Linked Products at InspereX. “In a lower-return environment, investors are generally seeking to protect their downside during periods of volatility. They aim to capture upside in the market and to avoid stalling growth which could impact their ability to achieve their financial objectives.”

Interest Rates for 2022: Flat With a Risk of Uptick; Lingering Low Rates Threaten Retirements, Creating Tough Conversations

More than half (51%) of advisors forecast 10-year Treasury interest rates to hover between 1-2% for 2022, but 41% are forecasting rates at 2-3% or more. Just 8% see rates going down to between 0-1%.

What’s the impact of lingering low rates? Many advisors fear for their clients in retirement and are having some tough conversations:

Significantly, 42% said their retired clients are using more of their principal as income replacement due to low interest rates; while 32% said they were worried some of their clients will outlive their retirement savings unless yields rise significantly.

Almost 30% said their clients are “tired of hearing me explain they have to take more risk if they want more yield,” and 10% said they have lost clients because they “could not generate the income clients wanted within their risk tolerance.”

One-third said their clients have held onto the belief that yields will rise for too many years, and it has cost them a lot of income.

In terms of strategies to generate income and protect principal, 65% of advisors believe a laddered approach to bond investing is effective. The top three types of bonds their clients own are high quality corporates (35%), municipal (32%), and treasuries (10%).

Almost four in ten (37%) said their clients don’t understand or appreciate what taxable equivalent yield means regarding municipal bonds.

The Advisor Business: Back to Office; Growth through Referrals;

Lacking Generational Relationships

Almost three-quarters (73%) of advisors said they and the majority of their teams have returned to a normal, in-office schedule. They also said that a number of work-related activities have permanently changed over the past 20 months, including the use of virtual meetings (68%), flexible work from home (65%), digital options for clients (55%), and client communications (50%).

In addition, 40% are now meeting with clients face-to-face, while 32% continue to use virtual tools such as Zoom, and 28% use the phone.

Advisors seem more cautious about hosting in-person educational events, with 19% doing so now, 5% plan to in Q4 2021; 22% will be hosting hybrid or virtual events moving forward; and 54% say they will host in-person events sometime in 2022.

Regarding new business in 2021, 42% of advisors said the majority of their new clients left another advisor; 36% said new clients never worked with a financial advisor before; and 22% said they were chosen as one of several financial professionals.

Unfortunately, just 25% of advisors said they had multi-generational relationships (children of clients) with 50% or more of their clients; the vast majority (75%) have generational relationships with 25% or less of their clients.

The top five ways advisors grew their business in 2021 were:

  1. Referrals without asking
  2. Asking for referrals from clients and strategic alliances
  3. In person networking
  4. LinkedIn prospecting
  5. Virtual education seminars

“Notice that the top two ways advisors generated new business were through referrals. That says everything about the need for advisors to build client trust and appreciation for the value they bring,” Mr. Mee said. “As advisors seek to grow their business in 2022, their focus should remain on increasing the value they add through exceptional service and the use of customized investment strategies that give clients peace of mind and confidence. If they do, they can expect the referrals to likely keep coming.”

Click here for the survey report.

About InspereX

InspereX is transforming how fixed income securities and market-linked products are accessed, evaluated, and traded. Home to the pioneering BondNav® platform – one of the first cloud-native bond aggregation platforms – InspereX provides financial advisors, institutional investors, issuers, and risk managers deep access to fixed income markets across asset classes, as well as industry-leading origination, distribution, and education in market-linked products. Focused on delivering true price transparency, liquidity, execution targeting price improvement, and the information advantage gained through data aggregation, InspereX inspires greater confidence through the power of technology.

The firm is a leading underwriter and distributor of securities to more than 2,000 broker-dealers, institutions, asset managers, RIAs, and banks. InspereX represents more than 400 issuing entities and has underwritten more than $670 billion in securities. The firm has seven trading desks and more than 200 employees with principal offices in Delray Beach, San Francisco, Chicago, and New York City.

©2021 InspereX ℠. All rights reserved. Securities offered through InspereX LLC, Member FINRA/SIPC. Technology services provided by InspereX Technologies LLC. InspereX LLC and InspereX Technologies LLC are affiliates. InspereX and insperex.com are trademarks of InspereX Holdings LLC.

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