With markets holding strong but concerns lingering about inflation and a resurgent pandemic, investors planning for retirement are hovering above the intersection of exuberant and spooked, according to the latest Retirement Advisor Confidence Index, Financial Planning's monthly barometer of business conditions for wealth managers.
The key metrics in the RACI survey saw little movement in August, though allocations of retirement funds to equities and bonds both ticked up.
Overall, the composite retirement confidence score checked in at 55 in August, off a tenth of a point from July, and two points up from the same period last year.
RACI scores above 50 indicate an increase in confidence, and scores below that mark signal a decline.
The relative calm can be partly attributed to the sleepy time of year when many clients are on vacation and generally checked out of their finances.
"August is usually a quiet month at our firm as most clients are away and personal tax returns have been filed," one advisor said.
Another retirement advisor observed the seasonality of retirement advice, describing the dog days of August as a quiet time before things get busy again heading into the fall.
"Summer months tend to be slow in [defined contribution]," the advisor said. "Clients and prospective clients aren't interested in speaking with a financial advisor. Business always picks up in September."
The movement around new retirement products sold and new enrollees in employer-sponsored retirement plans was marginal. Advisors reported a one-point increase in the number of retirement products sold to clients for a score of 57, up a point from July and up 5.7 points from August 2020. The RACI element that tracks participants in employer plans ticked down two points to 56.5, though that was up 7.7 points from last year when that category was underwater.
Some advisors are looking to Washington for investment cues, anticipating that Fed policy could induce continued inflation while also keeping an eye on spending priorities of Congress and the Biden administration.
"Due to inflation, we have purchased inflation-protected bond funds," one advisor said. "We additionally have bought infrastructure ETFs based on Congress pushing through the [infrastructure] bill."
The component of RACI that tracks retirement investments in bonds or debt-based securities ticked up 2.8 points in August to 59, the highest mark since May and 2.7 points ahead of the same period in 2020.
Some advisors described clients getting jittery about the stock market and, fearing a correction, looking to other asset classes. Other clients are taking to online trading platforms to make their own investments, either in equities or more exotic and trendy assets.
"I am noticing a lot more independent stock trading and cryptocurrency trading when looking at client statements," one advisor said. "Clients who had never traded a single share of stock before are suddenly providing statements from Robinhood and other online brokerages with crypto balances."
But surveying the landscape of asset classes, advisors can find problems with each one, and some see dark clouds gathering.
"Clients are concerned that cash is a drag on performance while equities are expensive and bonds are poised to dip when the Fed raises rates," one advisor said. "Perfect storm?"