The growing political conflict in the US, at the forefront of investors’ concerns for the next decade
6 SEPT, 2024
The uncertainty surrounding the upcoming presidential elections, the economic situation, and the interest rate environment has led some investors to reduce the risk of their portfolios, according to the 2024 investor survey 'Insights for a Brighter Future', prepared by Janus Henderson. Specifically, the survey reveals that only 42% of the investors surveyed are very satisfied with their current financial situation, compared to 48% a year ago. In addition, 67% believe that the cost of living is rising more rapidly than their income.
"In times like these, all investors should bear in mind that changes in a portfolio designed to avoid short-term volatility can often jeopardize long-term goals. The news cycle moves at an incredible pace and headlines can be bewildering, but US equity has remained remarkably resilient in the face of high levels of uncertainty.
Matt Sommer, head of Specialist Consulting Group at Janus Henderson Investors
Presidential elections worry more than inflation and interest rates
An election year marked by turmoil clearly weighs on the minds of current investors, as 78% of respondents are concerned about how the upcoming presidential elections may affect their financial situation over the next 12 months. In fact, there are more respondents worried about the elections than about persistent inflation (70%), high interest rates (57%), poor stock market performance (57%) or a possible recession (55%).
In the longer term (the next 10 years), investors' concerns are related to broader national and global systemic issues:
- Long-term impact of growing political discord in the US (77%).
- Rising cost of healthcare (67%).
- National debt (66%).
- Relations between the United States and China (64%).
Investors reduce their exposure to equities
Over the past 12 months, 33% of respondents have shifted equity assets to cash or fixed income investments and almost the same number of investors (32%) say they plan to shift equity assets to cash or fixed income investments in the next 12 months. Among the main reasons for leaving equities or planning to do so are rising interest rates, following a recommendation from their advisor, and feeling safer in cash or fixed income.
Although nearly half of respondents (54%) claim to be preparing for a recession, this figure is lower than the 65% in 2023.
Active management continues to be in demand.
Amid high uncertainty, 43% of investors who own mutual funds or ETFs say they prefer an even mix of active and passive funds in their portfolio, 26% lean towards active managers, 18% towards passive, 10% have no preference and 3% were unsure.
The areas that investors believe represent the best investment opportunities in the coming years are technology (73%), healthcare/biotechnology (62%) and the real estate sector (38%).
The risk of AI fraud is an established threat, financial advisors can help
Nearly three out of four investors (73%) believe that AI greatly increases the risk of financial exploitation, and 56% are very or somewhat concerned that they or a loved one could be victims of financial exploitation. Millennials (66%) and Generation X members (63%) are more likely to be concerned about financial fraud than Baby Boomers (48%) or members of the Silent Generation (43%).
In all generations, 45% of investors who use a financial advisor say that their advisor has already provided them with resources to help them avoid financial fraud, 29% would like their advisor to provide these resources and the remaining 26% say they are not interested in these resources.
The sentiment around AI is not entirely negative. Among those who use a financial advisor or would consider hiring one in the next two years, the majority feel good or neutral about their advisor using AI technology to create educational content (85%) or for administrative tasks (83%). However, more than a third (36%) would oppose their advisor using AI to make investment recommendations, and an even larger number (44%) would be upset if they knew their advisor uses AI to respond to their text or email messages.
Satisfaction with financial advisors increases
Among investors who work with a financial advisor, 67% are very satisfied and 31% somewhat satisfied with their relationship. In particular, when advisors attend to emotional needs, customer satisfaction improves, as factors associated with higher levels of satisfaction include:
- The advisor gives me peace of mind knowing that I am on the right track to achieve my goals (cited by 79% of "very satisfied" clients).
- He cares about me as a person, beyond my financial situation (72%).
- Provides financial education (65%).
Almost half of advised investors (42%) say their advisor is 50 years old or older, and within this group, 42% said their advisor had addressed the issue of succession planning, 25% were unaware of their advisor's plans but would be interested in knowing more, and the remaining 32% saw no need to address this issue.
Growth-oriented financial advisors should see the challenges investors face in this era of high uncertainty as an opportunity to strengthen their value proposition. It is clear that customer satisfaction rates are very high among advised investors, however, with many advisors approaching retirement, those who are able to generate trust and differentiate themselves by offering better experiences to their clients will be rewarded.
Matt Sommer, head of Specialist Consulting Group at Janus Henderson Investors
