Investment Advisers Have Election Jitters

With the 2024 U.S. presidential election approaching, many registered investment advisers are not worried about a significant equity market downturn over the next 12 months, but they do expect the market to experience more volatility than in 2023, according to the “Second Quarter Economic Outlook Index” released Wednesday by Security Benefit Corp.

“Advisers and their clients remain concerned about geopolitics and tensions around the world,” says Mike Reidy, national sales manager, RIA Channel, at Security Benefit. “And while politics and legislation can affect the markets, it is how RIAs manage portfolios and advise clients on the potential risks and opportunities that make the difference. Really, clients need advisers now more than ever.”

According to 80% of RIAs polled in the survey conducted in May, their clients are worried about how their assets will be impacted by the political climate in the upcoming year. Just 15% of advisers anticipate that the political environment will have a beneficial impact on the investment climate, compared with 32% who believe it will have a negative one.

Security Benefit revealed that 40% of advisers expressed being extremely or very concerned about inflation and the detrimental impact that foreign conflicts and inflation could have on equities markets, with the inflation rate for personal consumption expenditures standing at 2.6%. Down from 57% last quarter, only 47% of RIAs surveyed said inflation would fall between 2.2% and 2.9% in the second half of the year.

The survey was taken before the June 27 presidential debate, which has created a flurry of news about the election.

“Given that we can’t predict the outcome of the election or the impact of the election, we should focus on the things we can determine and control,” says TJ Arcuri, retirement plan consultant at SageView Advisory Group. “We should use this as an opportunity to ask our plan sponsors questions about how their employee demographics has changed or will change and, as a result, ensure the retirement plan design and education services provided to our clients meets their evolving needs.”

With concern already growing over volatility for the second half of the year, RIAs stated that their clients are very concerned about investment loss and value protection, Security Benefit found. The survey showed 80% of RIAs agree that protection against loss is “highly” valued by clients. However, only 50% of RIAs stated that downside protection products can play a valuable role in many clients’ portfolios.

“Encouraging clients to diversify their investments to reduce potential risks is important,” says Reidy. “Developing different investing scenarios and leveraging alternative products such as fixed and fixed index annuities can help clients adapt to change. For clients already using annuities, RIAs should keep an eye on renewal rates—as the Fed has not yet started a lower rate cycle, renewals may be more favorable than switching to other products.”

RIAs indicated their clients are very concerned about investment loss and value protection, given the mounting anxiety over volatility for the second half of the year. In fact, 80% of RIAs concur that clients value loss protection “highly.” About half (50%) of RIAs reported that downside protection products can be beneficial additions to the portfolios of many of their clients.

The age of a client is a significant factor in determining the appropriate level of downside protection, according to nearly half (49%) of RIAs. A comparable percentage (46%) think that deciding on the appropriate level is mostly dependent on how investments are allocated.

The survey was conducted in May. Greenwald Research surveyed 100 registered investment advisers from across the United States, each managing significant assets and directly interacting with clients.