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Advisors Are Not Panicking
by Steven
Even though our lawmakers didn't seem to be able to get it together yesterday, it is a positive sign that advisors are not fully retreating from the markets. In the kasina survey released September 26, 2008, 29% of financial advisors said that they are investing more in equity funds, while only 24% reported that they were investing less as a result of the current market conditions.
It's also good to see that the Treasury Department's announcement to create a temporary insurance system for money funds reestablished confidence among advisors. 37% of advisors prefer to park their clients' money in money market funds right now.
Furthermore, we found that more advisors are increasing their investments in bond, equity, and money market funds. Variable annuities and alternative investments, however, are not faring as well. 22% of intermediaries are investing less in VA's, while only 16% are investing more. Additionally, 31% of intermediaries are now investing less in alternative products (130/30, hedge funds, etc.), while only 14% are investing more.
The reason behind their optimism is not quite clear. One reason might be that most advisors weren't alive during the Great Depression. Therefore, unlike their parents and grandparents, they are unable to imagine the worst.
Hopefully, lawmakers will get it together today and pass the bailout. Advisors are going to benefit from avoiding panic in this market environment.
Posted by Steven Miyao at 11:32 AM Permalink Comments (2)
Steven,
Your results of intermediaries using more bond, equity, and mmf's and fewer VA's isn't logical. I'm not saying your results are wrong, just not logical. With all of the panic on Main Street over the current market/economic conditions, you'd think the "insured investment" of a VA likely utilizing a living benefit would be highly popular. That being said, in general, annuities are being under-utilized according to some modeling conducted by the Center for Retirement Research at Boston College. Here's their study: http://crr.bc.edu/images/stories/ib_8-10.pdf. That being said, I know we live in a logical (read: rational) world. Great info, thanks!
Tobin
I agree with you that it is not logical. But as we know, unfortunately, VAs are mostly sold not bought. It is hard right now to sell. More reason to simplify the sales process.
Steven