Financial Planning - November 2012

UP FRONT

Risk Tolerance Grows Again Planner confidence gaining, assets shift further into equities from cash RETIREMENT ADVISOR CONFIDENCE INDEX

Financial Planning’s Retirement Advisor Confidence Index rose for the second straight month in October, indicating continued optimism among the planning community.

The October index — a monthly barometer of business conditions for wealth managers — registered 52.6%, after readings of 51.6% in September and 48.6% in August, according to a survey of planning professionals. Advisors reported a continued rise in risk tolerance, again shifting client assets into equity-based funds, while decreasing the amount held in cash.

“When the market ticks up, as it has
for most of the year, clients tend to be
more optimistic about the future and are
willing to place more in equities,” one
advisor noted. Another highlighted con-
cerns about tax rate changes: “I expect
[retirement] contributions to increase to
take advantage of an expected increase in
market levels and to shield income from
expected higher federal income taxes.”
The index reflected a two-month
decline in assets held in cash — from about
50% for August to 41.7% for October — as
well as another gain in risk tolerance.

RACI is comprised of 12 factors — including asset allocations, investment product recommendations, client recruitment and retention, economic and risk factors, taxes and plan fees — to track trends in wealth management business cycles.

52. 6

RetiRement AdvisoR ConfidenCe index (+ 1)

Indicators represent both positive and negative factors.

For a contrary indicator, such as a higher allocation to cash, a reading of more than 50 is negative, while a reading of less than 50 is positive. Four of the 12 RACI factors are shown below.

52. 7
RISK-TOLERANCE
LEVEL
(+ 2. 1)

CLIENT ASSETS USED TO BUY
EQUITY-BASED SECURITIES (+ 5. 2)
55. 1
CLIENT ASSETS
ALLOCATED TO CASh
(- 1.0)

ADVISOR
fEES
(+ 2. 5)

The RACI, published in partnership with ADP, is based on a monthly survey of more than 300 advisors. For the RACI methodology statement and more results, visit financial-planning.com. ADP and the ADP logo are registered trademarks of ADP, Inc.