Optimism the Only Connection, Survey Finds

These differences of perspective were particularly distinct among Gen X and Y investors, MFS said.

The survey, which addresses investors’ and financial advisers’ attitudes toward and perceptions of investing, asked what financial concerns would be most worrisome for investors. Twenty percent of advisers think a major drop in the stock market is investors’ top financial concern, but only 5% of investors said it is.

MFS found that advisers may be fooling themselves if they think their clients’ appetite for risk has been restored since the recession. Three quarters of advisers believe that investors have become “much more” or “somewhat more” risk tolerant over the past 12 months; however, only 15% of investors report an increase in their willingness to take on more risk. Likewise, 16% of advisers perceive that investors have become more risk averse since 12 months ago; in fact, 26% of investors report they are less willing to take on risk to achieve higher returns.

There were differences in investment selections as well. Seventy-two percent of advisers think U.S. equities are an excellent or very good place to invest; only 35% of investors agree. Six in ten advisers think international stocks are an excellent or very good place to invest; whereas not even one-quarter (22%) of investors agrees.

MFS also focused on how advisers perceive Gen X and Gen Y to be investing; Gen X and Y being anyone under the age of 46. The survey found that 84% of advisers think Gen X/Y investors have a primary investing goal of growing assets. However, only 39% of Gen X/Y investors report this as a primary goal. Protecting principal is more important to the under-46 crowd than most advisers think: only 9% of advisers think Gen X/Y have a primary goal of protecting principal while 22% of GenX/Y say this is a primary goal. Lastly, advisers think Gen X/Y have 50% of their investments in U.S. equities and 9% in cash; in fact, Gen X/Y report significantly less equity exposure, 34%, and 3 times greater cash exposure, 30%.

The one point on which advisers and investors seem to match is optimism about the U.S. economy over the next five years; 35% of advisers reported that investors are optimistic, while 47% of investors reported being optimistic.

"While these disconnects show a need for advisers to reconsider how they view their clients, the survey showed that advisers are underestimating investors' optimism about the future of the U.S. economy," said William Finnegan, senior managing director of retail marketing for MFS. "With Gen X/Y maturing and Boomers approaching critical decision points for retirement, we believe advisers should reassess how they communicate with clients, and what the lasting impact of 2008's financial crisis has had on investors' risk tolerance."

The online survey was conducted from February 7-15, 2011. 596 individual investors with $100k+ in household investable assets and 612 licensed financial advisers (either FINRA or SEC) who have been licensed for at least three years with at least $500,000 or more in annual mutual fund sales participated in the survey.