RIAs’ outlook on economy lukewarm, survey shows

A new survey of registered investment advisors shows a climate of tempered confidence in the sector, with more than two-thirds expecting at least a marginal rise in financial markets over the next year.

According to the inaugural survey of 201 RIAs by Security Benefit, DPL Financial Partners and Greenwald Research, 70 percent of advisors anticipate a minimum 3 percent increase in the S&P 500 within the next 12 months.

The survey includes an index of RIA sentiment on economic conditions. The index, which will be measured quarterly, started off with a baseline score of 58 points out of a possible 100, signaling moderate optimism.

"The Index launches with a baseline of guarded optimism that’s intriguing in its own right, coming at what many view as a pivotal inflection point for the economy," Mike Reidy, national sales manager for the RIA channel at Security Benefit, said in a statement announcing the findings.

He highlighted the potential of the index to shed light on future financial trends, considering the critical role advisors play as financial market watchers and shapers of their clients’ investment strategies.

“By posing questions about the equity market, inflation, recession risk, amongst others, we’re working to capture the current sentiment at a more micro level to help advisors and their clients with their financial planning,” said Matt Greenwald of Greenwald Research.

Despite the overall positive outlook, the survey highlighted concerns about market volatility, with nine-tenths (88 percent) of participants expecting it to remain high or increase – including 42 percent who are bracing for more turbulence – over the next year. That reflects broader industry expectations of continued economic uncertainty, despite the Federal Reserve's efforts to curb inflation by keeping interest rates elevated.

The survey also explored expectations regarding inflation and recession risks.

The majority of advisors align with Federal Reserve projections of easing inflation, with 56 percent predicting inflation rates between 2 and 2.9 percent over the next year. Still, four-tenths (39 percent) shared expectations of inflation staying above 3 percent.

The RIAs' outlook on recession was also mixed, with a slight 58 percent majority seeing almost no or little chance of an economic downturn. Thirty percent see a moderate probability, while 12 percent see it as a high-probability or near-certain event.

The survey also found almost three-fifths (58 percent) of RIAs were slightly concerned about a major drawdown in the equity markets, which could be stoking advisors’ appetite for investment products that provide downside protection and potential upside.

"Because there is significant worry about the potential for a market downturn, we’re seeing increased adoption of FIAs, fixed annuities, and other protection-based products," said David Lau, CEO of DPL Financial Partners.