That’s according to the 2018 Trends in Investing Survey, conducted by the Journal of Financial Planning and the FPA Research and Practice Institute, which finds that some trends that emerged in the wake of the 2007–2008 financial crisis have, since 2010, solidified—while others have backed off.
While the financial crisis drove advisors into “safety” moves, the report says, with 2010 being the pivotal year, not all those moves have been sustained. And since eventually the pendulum tends to swing in the other direction, portfolio moves include some returns to products and patterns that predated the Great Recession.
There’s also been little action in some areas in which it might be expected that advisors would adopt new products, methods or technology. The survey, first begun in 2006, has not only tracked investing trends over the last 12 years, but also added new questions to identify new areas of interest.
Advisors this year, for instance, were asked about their use or recommendation of environmental, social and governance funds. Replies indicate that 26 percent of respondent advisors currently use and/or recommend ESG funds, and 20 percent plan to increase their use/recommendation of them over the next 12 months.
Asked about their clients’ concerns over the past six months, 76 percent of respondents cited the effects of volatility on client portfolios; 68 percent said clients were concerned about the effects of the Tax Cuts and Jobs Act (tax reform) on their portfolios; 53 percent said they were interested in cryptocurrencies; 49 percent, fees and other investment costs; and 38 percent, ESG/socially responsible investing.
And among the “other” concerns cited by 6 percent of respondents, the most common were the effects of the political environment; the effects of rising interest rates; and the level of equity exposure.
Advisors themselves were bullish in the short term—the next six months—but for the next six months after that, says the report, “their longer-term expectations for the economy are waning, with a slight uptick in bearish sentiment for their two-year and five-year outlook.”
But that doesn’t necessarily mean that they’re ready to abandon older strategies, such as a portfolio composed 60 percent of stocks and 40 percent of bonds. Fifty-one percent, in fact, say they’re somewhat to very confident in the traditional 60/40 portfolio, which is comparable to the results in the 2017 survey. And the percentage “very doubtful” that 60/40 can still provide historical returns actually fell from 10 percent in 2017 to 5 percent this year, while slightly fewer advisers were neutral on this in 2018 (12 percent) than in 2017 (14 percent).
A nontrend, which might surprise some, is the matter of cryptocurrencies. Just one-percent of advisors, the study finds, are using and/or recommending cryptocurrencies. Asked what they think of cryptocurrencies as an investment, nearly 30 percent agreed with the statement that cryptocurrencies are “an interesting concept to keep an eye on, but not invest in yet.”
If there is a trend around cryptocurrencies in client portfolios, it’s that the low usage thus far will probably continue for the next year; only two-percent plan to increase their usage/recommendation of cryptocurrencies over the next 12 months.
The slides above show three trends that emerged in the survey.