Advisers should have difficult discussions about how much a client actually needs to retire, rather than how they feel about risk.
A majority of advisers feel that a sizable number of their clients are in danger of not meeting their retirement goals.
According to a survey released today by Russell Investments, fully 80% of advisers said that one out of four of their clients won’t reach their retirement targets unless they start saving — or making — more money.
“I see my overwhelming challenge to be convincing clients about the need to either work longer or save money,” Suzanne Uhl-Melanson, and investment adviser representative at Commonwealth Financial Network, said in a comment included in the survey.
To address the crisis, advisers should have “difficult” discussions about how much a client actually needs to retire, rather than how they feel about risk, said Phill Rogerson, managing director, consulting and client services, at Russell.
“Given the amount of shortfall investors have in retirement plans, it’s far more important to do a goals-based process, focused on the gap between what clients have and what they need,” Mr. Rogerson said.
The survey also showed that while many advisers are now more confident about asset allocation, they’re still shunning riskier assets such as equities. Only 7% of advisers surveyed said that they are “not sure” now about making changes to asset allocations over the next year, down from 11% three months ago. And more than a quarter (27%) of advisers in the survey — conducted during the second quarter of the year — said that they are likely to reduce allocations to risky assets, up from 23% in the first quarter.
Still, among those advisers who are bullish enough to wade back into stocks, they’re choosing some of the options usually considered the most risky, with emerging-markets equities at the top of the list. Forty-eight percent of respondents said they will increase allocations to emerging-markets equities over the next 12 months. Advisers surveyed also indicated they will increase allocation to U.S. large-cap-value stocks, as well as equities in developed countries, the Russell survey showed.
Among the least attractive asset classes now, according to the survey, are corporate bonds and high-yield bonds. More advisers said they’re planning to decrease their allocation there, and fewer advisers said they’re planning to increase their exposure to corporate debt.
