Fidelity Financial Advisor Solutions has announced the Q3 results of the Fidelity Advisor Investment Pulse. Managing Volatility took the No. 1 spot for the second straight quarter and Fixed Income and Interest Rates were tied for the No. 2 spot.
Many advisors surveyed by Fidelity Financial Advisor Solutions cited the dual challenge of managing downside risk while also providing their clients with returns in the current low interest rate environment.
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"We surveyed advisors throughout Q3 and their focus on volatility remained high even before the ups and downs in the market the past few weeks," said Scott E. Couto, CFA, president of Fidelity Financial Advisor Solutions. "Many advisors fielded calls from clients early last month expressing concern about their portfolios and their allocation to equities."
"But the silver lining for advisors is that this has been a great opportunity for them to demonstrate their value to clients," continued Couto. "They can offer historical context and explain how staying invested in the markets provides the opportunity to fully participate in those rallies. Case in point: two weeks ago, after wide market swings, the S&P 500 posted its biggest one-day gain of the year. Many of the best periods to invest in stocks have been those that were among the most unnerving."
Couto also suggests that advisors consider using a "bucket" approach with some risk-averse clients where they divide a client’s assets into buckets that are specifically focused on certain objectives, including growth, managing risk or preserving capital. The growth bucket would hold mainly equities while the capital preservation bucket would hold less volatile assets such as short-term bonds.
In addition to the concerns around volatility, the Q3 survey indicated a marked increase in advisors’ focus on fixed income and interest rates.
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By GlobalData"We’ve also seen this increase reflected in the recent uptick in conversations about fixed income that we’ve been having with clients recently. In January, we had about 10,000 conversations, and in September, we had well over 20,000," said Couto. "There are several strategies advisors can use in a rising rate environment, specifically shortening the duration, adding municipal bonds, exploring non-core income options, and anchoring their clients’ portfolios with high-quality bonds."
The Fidelity Advisor Investment Pulse is a survey that captures the investment topics on the minds of 250 advisors in order to share common concerns and deliver resources to help them navigate changing market conditions.
Fidelity offers a range of insights that can help advisors navigate these market fluctuations. For access to the insights and resources that Fidelity offers, advisors can visit: advisor.fidelity.com/investmentpulse. They include:
- Is Loss Aversion Causing Investors to Shun Equities? – Fidelity’s asset allocation and behavioral economics experts look at how investors are affected by loss aversion – in which the pain felt from a loss is about twice as strong as the pleasure felt from an equivalent gain – and how that behavioral bias has prompted some investors to underallocate to equities.
- Is It Systemic, or Just a Short-Term Shock? – Fidelity’s director of global macro research looks at the impact that external shocks and negative headlines, such as geopolitical events and excessive leverage, have had on the financial markets.
- Managing Client Emotions in Volatile Markets – This online resource includes interactive charts and insights about volatility and historical market performance across various market environments which advisors can leverage to remind clients that long-term investing takes time.
