Clients’ optimism about the economy since Election Day has given way to concern about the future amid falling fees for retirement planning, advisers said.
Both demographics and politics prompted greater caution, according to this month’s Retirement Adviser Confidence Index — Financial Planning's monthly barometer of business conditions for wealth managers.
To put it another way: “Clients are worried about everything,” one adviser wrote.
The index ticked down 0.6 points to 56 while clients’ perceived risk-tolerance level fell 7.7 points to 58.5. Both indicators remain in positive territory.
Advisers also reported increases in employer retirement plan enrollments and a positive business outlook, even as preparation for the fiduciary rule has pushed down fees.
One adviser said they were "cautiously optimistic," but added, “uncertainty feels like it’s at an all-time high.”
Advisers split on whether their clients see economic conditions improving under President Trump. “People are more confident in investing than they were last year,” one adviser said. Another wrote, “[Clients] are scared and frozen about investing.”
Clients have pulled back on taking risk, advisers said, following 10- and 20-point bumps in risk tolerance the previous two months. Many are wondering whether Trump’s policies will lead to the economic growth he promised, advisers said.
“Clients are concerned with [the] current political environment but don’t want to be left out of market gains,” one planner wrote.
Despite these fears, enrollment in employer-based retirement plans rose.
“People want to retire earlier, while knowing that they will be living longer in retirement. This means those in the mid- to higher-income areas are more willing to plan and listen,” one adviser wrote, adding that most clients enrolling are 50 years old or older.
Enrollments grew 1.9 points. However, total cash contributions to retirement plans dropped 2.9 points and total retirement product sales fell 1.2 points.
Advisers expressed confidence in their retirement business, despite reporting a 2.5-point decline in fees charged for their services. Planners connected the lower costs to the DoL’s fiduciary rule.
“We are forced to lower fees and provide more service to accounts,” another adviser said. “Every size account is talking fees.”
The Retirement Adviser Confidence Index is composed of 10 factors — including asset allocations, investment product recommendations, economic and risk factors, taxes and planning fees — to track trends in wealth management. RACI readings below 50 indicate deteriorating business conditions, while readings over 50 indicate improvements.