Market gains and politics are prompting clients to invest more money for retirement, advisers said. Equity returns have created a sense of cautious optimism under President Trump, according to this month’s Retirement Adviser Confidence Index — Financial Planning’s monthly barometer of business conditions for wealth managers.
The index grew by 1.6 points to 56.4 after ticking down by 0.5 points the previous month. Risk tolerance also increased after a drop in the prior month, gaining 3.4 points to 56.
Clients contributed more to their retirement plans, bought more retirement products, enrolled in more employer-sponsored plans and paid for more retirement services, advisers said.
“As clients saw the equity market as the best way to invest, they kept putting money into the retirement plans,” one adviser said.
Retirement contributions rose 2.3 points to 67.5, and retirement-planning fees swelled 2.8 points to 55.7. Market performance, Tax Day and the Department of Labor’s fiduciary rule all played a role in clients’ greater focus on retirement, according to some planners.
“Returns are up, so billing went up,” one adviser wrote, offering a caveat. “The uncertainty regarding the fiduciary rule getting stalled out has made people cautious, even though markets have been doing well.”
Another adviser said, “Fees were up only because asset levels were up, not because the actual fees went up. Fees are actually compressing.”
Several advisers agreed that fees remain a concern.
“Firms and clients alike are more focused on fees since news of the DoL rule,” one adviser wrote. “Clients are now comparing fees instead of comparing services between employer plans and IRAs.”
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Advisers also noted a dip in their clients’ retirement savings activity after the tax filing deadline passed.
June 7 - The end of tax season bolstered client contributions to retirement programs and boosted advisers’ fee business.
- Low rates, political turmoil causing risk tolerance to plummet.
The comparison, the adviser added, displays a “typical apples-to-oranges fallacy.”
Any end to the solid business growth under Trump also poses risks.
One adviser has been warning clients that “there’s a fair chance for a 10% market correction in the next nine to 12 months if earnings begin to stall.”
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.