In a year marked by whipsawing investor confidence,
retirement savers took a bullish turn in November as their appetite for risk
and equities surged, according to advisors polled in the latest Retirement
Advisor Confidence Index, Financial Planning's monthly barometer of business
conditions for wealth managers.
Many advisors say their clients are beginning to feel better
about some of the causes of their uncertainty this year — notably the
presidential election and the economic turmoil stemming from the coronavirus
"I think there's been a more risk-on approach now with
markets rebounding, us getting clarity on politics, and positive COVID vaccine
news," one advisor says.
That confidence was evident in how clients viewed equities
as a component of their retirement plan in November. The component of RACI that
tracks assets allocated to equities posted a score of 63.3, the highest mark of
the year and 12.5 points above the previous month.
RACI scores above 50 indicate an increase in investor
confidence, and scores below that mark represent a decline.
Confidence in equities bottomed out in March, but has
generally been rebounding since — save for a dip in October just before the
presidential election, which had many investors feeling more cautious.
"Election uncertainty removed and positive outlook on
vaccines led to more equity investments and higher risk tolerance,"
according to an advisor who took the survey.
Risk tolerance was another big mover in this month's survey,
checking in at 57, surging 19.2 points from the previous month, and up a modest
3.4 points from the same period last year. The score of 57 matched the
high-water mark for risk tolerance this year.
One advisor attributes that spike to factors related to the
"Higher risk tolerance and better consumer sentiment
due to [the] election cycle finally over and holidays approaching," the
Overall, the composite RACI score in November was 53.6, a
6.1-point rebound from October that equaled the highest score of the year.
Investors' confidence level in their retirement plans was hovering in the
low-to-mid forties from February to May, before jumping into the low fifties in
the summer months and then dipping back down in October on the eve of the
Other asset classes saw a lift in November. Advisors report
that clients were feeling good about bonds or debt-based securities, while some
upped their cash positions.
The component of RACI that tracks bonds and debt-based
assets soared 10.5 points from October to a mark of 62.8. That score was not
only the high level of the year, but the highest score in that category since
Advisors attribute the improvement in confidence in part to
clients' evolving feelings on the pandemic.
"COVID frightened people at first," one advisor
says. "But the recovery has made people generally more comfortable
But if some of the initial COVID-related anxiety has been
priced into the market, investors are also looking ahead hopefully to a time
when effective vaccines are widely distributed and administered.
"There is more confidence in the markets," one
advisor says, "as it appears that the vaccines will end the pandemic in
the foreseeable future."
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