As if we didn’t know—fear drives investor behavior, and that can take a toll on long-term financial goals.

This latest confirmation of investors’ contrary behavior when markets go south comes from an Eaton Vance survey that also found more financial advisors are viewing fear as clients’ primary motivator.

Eighty percent of respondents said so, compared with 51 percent in the first quarter of 2015.

Increased market volatility is worrying more than clients, though; nearly half (44 percent) of advisors polled believed that the likelihood of a U.S. recession by year-end is either moderate or high, underscoring their growing concern over the pace and direction of global growth.

The news wouldn’t come as any surprise to Fidelity Investments’ call center staff, who fielded a record number of calls in January from participants checking on their 401(k) balances and investments.

On January 4 alone, nearly 4 million people called in to see what had become of their retirement savings.

T. Rowe Price participants weren’t exactly relaxed about the situation, either, where phone volumes ran 56 percent higher than normal during the first week of January and Web traffic was 30 percent higher.

Even though they’re also concerned about market volatility, 47 percent of advisors reported counseling their clients to sit tight despite the market’s ups and downs and stick to long-term plans. That could be easier said than done, although investors who manage to set aside their fears could see some opportunities amid the wreckage.

“Market volatility is an output of investor sentiment and history suggests that dislocations caused by volatility can present compelling opportunities for investors who remain calm, evaluate the fundamentals and take a long-term approach to their portfolios,” John Moninger, managing director at Eaton Vance, said in a statement.

Moninger pointed to the volatility spike in the later part of 2015 as the cause of investors’ emotional reaction and possible investment actions that could work against their long-range goals, and suggested that advisors point out the advantages of tax loss harvesting as a means of helping clients act prudently in volatile markets.

That could be a tall order, since 61 percent of advisors reported that they don’t believe their clients even know the effective tax rates on their investments—and just 45 percent of advisors said they harvest tax losses every year. Only 3 percent do so each month and 17 percent harvest tax losses quarterly.

Instant Insights /

Fear drives investor behavior, hurts long-term goals

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