Financial Planning - January 2013

UP FRONT
Growing Worries Take a Toll
A drop in risk tolerance pulls down the latest index reading.
RETIREMENT ADVISOR CONFIDENCE INDEX

T w AD

Financial Planning’s Retirement Advisor Confidence Index edged down for a second straight month in December, driven largely by a sharp decline in client risk tolerance.

The index — a monthly barometer of business conditions for wealth managers — registered 49. 8, down from the November level of 51. 1, according to a survey of planning professionals. RACI readings of less than 50 show bearish advisor sentiment on confidence, while levels of more than 50 indicate advisor bullishness.

While many of the factors showed only modest changes, advisors reported that client risk tolerance had dropped to 42. 2 from 49. 2 in just one month’s time, as clients fretted over fiscal cliff negotiations.

“People in our practice are generally
concerned about the fiscal cliff,” one
advisor said, adding that clients “are cur-
rently placing a lower percentage of their
total assets into equities and a higher
percentage into debt securities.”
The index is composed of 12 fac-
tors, including asset allocations, invest-
ment product recommendations, client
recruitment and retention, economic
and risk factors, taxes and plan fees. The
results are used to track ongoing trends
and the prevailing direction of changes
in wealth management business cycles.

RetiRement AdvisoR
ConfidenCe index
(- 1. 3)

42. 2
RISK-TOLERANCE
LEVEL
(- 7.0)

50. 5
NUMBER OF RETIREMENT
PRODUC TS SOLD (- 3. 4)

ished in e than 3 Inc.

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.