Cash Gains as Confidence Slips
Portfolios reflect a decline in risk tolerance; advisor fees inch higher
RETIREMENT ADVISOR CONFIDENCE INDEX
After two months of modest gains, Financial Planning’s Retirement Advisor Confi- dence Index — a monthly
barometer of business conditions for
wealth managers — slipped for October,
driven by declines in equity investments and greater allocations to cash.
The index registered 51. 1, a drop
from the October level of 52. 6, according to a Financial Planning survey of
planning professionals. RACI readings
below 50 show a decline relative to the
prior month, while more than 50 indicate expansion.
Advisors reversed a two-month decline
in the portion of assets held in cash, jumping to 49.2% from 41.7% last month — a
contrary indicator. Advisors also cut the
chunk held in equities to 53.8% from
60.8%. Risk tolerance also slipped.
“With the market up for the year, people seemed to want to take some gains off
the table,” one advisor said. “That meant
selling some stocks and buying more
bonds.” The survey focused on a period
just before the election, and many planners said clients were more risk-averse.
The 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.
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
(- 1. 5)
NEW PARTICIPAN TS IN
(+ 2. 4)
CLIENT ASSETS ALLOCATED
TO EQUITY-BASED SECURITIES (- 7.0)
CLIEN T ASSETS
ALLOCATED TO CASh
(+ 7. 5)
FEES ChARGED FOR
RETIREMENT SERVICES (+0.1)
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.
December 2012 Financial Planning 19